On Monday, J.C. Penney announced the selection of a new CEO, Marvin Ellison, who will be the first person of color to take the reigns in the company’s 112-year history. He also increases the number of black CEOs at Fortune 500 companies to seven.
But his appointment comes while the company is still struggling after a previous CEO made disastrous decisions, and it follows a trend of diverse candidates being given a shot at the top job only when a company is in a bad situation.
Ex-CEO Ron Johnson blew a $4 billion hole in sales before leaving the role in early 2013 through his decisions to try to make it more hip and attractive to the young and wealthy. Mike Ullman took over after that, stemming some of the losses and undoing many of the changes, and the company has seen sales gains for the past two-quarters while profit margins have widened, yet it has still incurred $3 billion in losses over the past three and a half years. Its stock shares have also fallen 23 percent this year so far. Visits to its stores are still declining. And a presentation to its analysts last week went poorly, as it said its has cut its sales growth forecast amid slowing revenues. Its shares sank 29 percent last week. Meanwhile, it is facing increasing competition for selling cheap clothing without very much money to spend on renovating stores or doing ad campaigns.
Women and people of color are more likely to be promoted to the top of struggling companies, a phenomenon that has been dubbed the “glass cliff.” No matter what previous performance period researchers looked at, return on equity was significantly negative before a woman and/or a person of color became CEO at a Fortune 500 company between 1996 and 2010, even with a variety of factors that could have an impact taken into account.
Research just on women has found that this often occurs because rough patches make companies think they need to shake things up — but white men are allowed to maintain control during the good times. The same is likely true for people of color. (Plenty of other studies have found evidence of a glass cliff for women.)
Ellison was selected for his previous role turning around Home Depot as an executive vice president. Customer service had deteriorated under former CEO Bob Nardelli, so Ellison simplified tasks to give employees more time to help customers, and sales rebounded while the company’s stock nearly tripled over the last four years. That experience may mean he can engineer another full rebound at J.C. Penney. But if he can’t, he could face the other side of the glass cliff: after being handed a more difficult job than what white men take on, the scrutiny is higher and the chance of success lower. Since white men are already thought to be better leaders, women and people of color are often assumed to be less capable, which means they could run up against resistance or even hostility as they go about trying to enact reforms. And if they do get the boot, they are most likely to be replaced by a white man.