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“I would have loved for the board to have had a woman to pick from. But at the end of the day, the board selects the CEO, and we just didn’t have any women who were ready for the job.”
Indra Nooyi’s comment to the New York Times in August, in the wake of her announcement that she would step down as PepsiCo’s chief executive, was another reminder of the dearth of female chief executives in the US — and one possible reason for it.
In 2017, there were more than 30 female chief executives at the largest US listed companies. Ms Nooyi’s resignation from PepsiCo will reduce the number of female chief executives of S&P 500 companies to 24. Kathy Warden, who is due to take over as chief executive of Northrop Grumman from Wes Bush in January, will bring the number back up to 25, but parity seems a long way off.
Allyson Zimmermann, European executive director of Catalyst, the non-profit research group, says: “Male CEOs change all the time, but when you lose women you feel it because there are so few. It would be great to get to the point when, if women step down, it doesn’t feel like a seismic shift.”
Similarly, in the UK, the number of FTSE 100 female chief executives remains in single figures. Moya Greene’s departure from Royal Mail has cut the number of female chief executives at this level to six. That is twice the number of female FTSE 100 chief executives in 2007, but lags behind the increase in female FTSE 100 directors, who now constitute about 29 per cent of board members, against less than 12 per cent in 2008. Just over a fifth of S&P 500 board members are women.
Those are the data. Why, despite the efforts of activists and policymakers, does the number of female chief executives remain so low? Ms Nooyi identified the most immediate problem: a lack of qualified women in the anteroom to the chief executive’s office. In the eight years after 2007, according to Catalyst, the number of women in senior roles at US companies increased by only 1 percentage point. Every year since 2013, more women have replaced men as chief executives of US companies than men have replaced women, according to consultancy Challenger, Gray & Christmas, but the differential is slim. The picture is similar around the world.
“Companies just aren’t capable of getting women on the CEO bench,” says Elin Hurvenes, chief executive and founder of the Professional Boards Forum. When she talks to companies about the internal candidates in their succession plan, “in 99 per cent of the cases, it’s three men”.
The slow progress is starting to animate legislators around the world. Last month, the California legislature passed a bill requiring listed companies headquartered in the state to appoint at least one woman to their boards by next year — and at least three by 2021 on boards with more than six members. Board quotas are already in place in some European countries such as France, Germany and Norway, which pioneered the legislative approach 10 years ago.
One hypothesis is that demands for more women on boards are encouraging would-be chief executives to switch to pursuing portfolios of non-executive directorships. Ms Hurvenes, who is based in Norway, says concerns that quotas would simply create an elite of “golden skirts” — a few women holding multiple board positions — were overblown. She advises women not to “go plural” — building a portfolio of directorships — in their forties but to pursue executive roles because boards value recent operational experience.
Campaigners agree the real impetus for change has to come at executive level and below — the point when companies are working out how to recruit and retain a diverse group of managers.
For instance, only 10 per cent of FTSE 100 companies’ executive directors are women. In the UK, the Hampton-Alexander review, which focuses on increasing female representation in the higher echelons of UK companies, has set a voluntary target for women to make up a third of boards at the 350 largest listed groups. The more relevant target, though, is for FTSE 100 companies, which have been set the goal that women should represent a third of “senior leadership” (that is, executive committees and their members’ direct reports) by 2020.
As important is to ensure that potential chief executives, women and men, have a well-rounded corporate experience and to assess them on potential as well as their record. Advocates for gender balance are optimistic about the number of female chief financial officers at big companies, as this role can be a stepping stone to chief executive. But CFOs usually lose out to an executive with broader operational experience.
Measures to improve the overall supply of women for senior roles could include encouraging more sponsorship of women, who, according to research, lack the access to senior leaders that men have, and eliminating bias in recruitment advertising and promotion discussions.
“It’s important for people in positions of power to step forward and address the systemic bias and barriers that are holding back the talent pool,” says Ms Zimmermann. “When you say, ‘They aren’t ready’, how do you know?”
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