Few women are brought in as CEOs of the largest American companies, and when they are, they’re more likely to end up forced out in the end, according to a new report from Strategy&.
Just 3 percent of the new CEOs brought in among the country’s largest 2,500 public companies were women this year, a 1.3 percent drop from 2012. And the percentage of women at the helm of the largest companies may be staying relatively flat in recent years because female CEOs are more likely to be fired than men. Over the past decade, 38 percent of women were forced out of the chief executive role, compared to just 27 percent of men, a finding that is statistically significant.
Part of the problem may stem from the way they’re brought in in the first place. Female CEOs are more likely to be “outsiders,” or hired from outside of the company — 35 percent of them, versus 22 percent of male CEOs. These outsiders may be brought in when things go sour. Companies who force out CEOs over the lowest returns to shareholders most often hire outsiders as replacements, the report found.
This is the phenomenon dubbed the “glass cliff”: women are brought into top management roles just as things get bad in order to clean up the mess. One study of FTSE 100 companies who appointed women to their boards found they were more likely to have just experienced a bout of bad performance than those who appointed men. Another found that companies are most likely to appoint women after a loss that signals underperformance. And yet another found that this doesn’t just impact women, but people of color, who are both more likely to be promoted to CEO when the firm is performing poorly. This may happen because companies in tough times want to try something new, which can mean bringing in a non-white, non-man, but if things are going well there’s no need to shake them up.
There are plenty of real life examples of this dynamic across industries. Perhaps the most high-profile recent example is General Motors’s new female CEO Mary Barra, who was brought in just before it announced a massive recall linked to at least 13 deaths, although she came from inside the company itself. It happens often in finance, where the first high-profile exec blamed for the crisis was a woman, the first head to roll after JP Morgan’s disastrous London Whale trade was a woman, and where women were bumped into leadership roles just before the crisis itself wreaked havoc on firms. It’s also happened to the first female CEO of Sunoco — Lynn Laverty Elsenhans took the helm after its shares had fallen by 52 percent — and the first female CEO of Xerox — Anne M. Mulcahy took over when the company was $17 billion in debt and under investigation from the Securities and Exchange Commission.
The Strategy& researchers also note that the need to bring women into the top job from outside the company shows they are failing to create a pipeline of female talent. “That women CEOs are more often outsiders may be an indication that companies have not been able to cultivate enough female executives in-house,” writes Senior Partner Gary L. Neilson. “So when boards look for new CEOs, they necessarily find a larger pool of female candidates outside their own organizations.” The majority of women who make it into the pool of top executives are still in staff or support positions like human resources or communications and few report directly to the CEO, giving them less of an edge on being next in line.
This too holds a problem for women who are trying to advance the top job: The vast majority of companies pick their chief executives internally, the report finds. Three-quarters of incoming CEOs last year were insiders and a quarter of them had only ever been at one company. If women aren’t being groomed internally, they’ll get fewer shots at the top job.
The report does note that there are some positive trends. Over the last decade, 75 percent more women have been brought in than have left the chief executive role. And the share of women among new CEOs has been “considerably higher” over the past five years than the five years before that, it says. But progress will remain slow. It projects that by 2040, women will make up about a third of new CEO appointments — a larger share, but still far from parity.