Women managers earn less under female CEOs because organizations play diversity

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The number of female CEOs has slowly increased over the past decade, but only 6% of the CEOs of the 500 largest companies in the United States are women. It may seem logical that female senior executives would benefit from having a female CEO at the helm of their organization, but a new study suggests just the opposite. A female CEO can be bad news for female senior executives, at least when it comes to their salary. The researchers believe that female-led companies may not have the incentive to invest in other female managers.

The study, published in the Journal of Applied Psychology, examined 20 years of data on the compensation of the management teams of the largest 1,500 American companies (American public companies are required to disclose information on the compensation of their CEOs and the other four highest paid managers – this is the data used for the study). The researchers found that “if a female top manager has a female CEO, her compensation is about 16% lower than it would have been had she had a male CEO.” It’s important to note that this pay gap is an average result and certainly not true across all companies. Male senior managers earned the same amount whether they worked for a male or female CEO.

Why do these women managers earn 16% less when a woman is at the head of the company? The researchers tested two competing theories. One possibility suggests that women in power are more critical of female subordinates, and therefore a female CEO may be inclined to pay other women less. Women in positions of authority who treat subordinates poorly are often called queen bees. But the researchers concluded that the data did not suggest that female CEOs behaved like queen bees, and that CEOs were probably not responsible for female managers receiving less pay.

Instead, they found evidence that organizations with a female CEO have less incentive to retain other senior female executives. Companies are generally supportive of gender diversity and often strive to have some female presence in senior management. Strong gender diversity efforts are often about paying a female senior executive more to attract and retain her. However, if that same organization already has a female CEO, that CEO may be a sufficient symbol of the company’s gender diversity goals. As a result, there may be less incentive to retain other female senior managers. The researchers explain: “A female CEO can thus make the presence of other women on the [top management team] for diversity purposes, allowing the company to pay them less than it would have had the company had a male CEO.

In other words, once some gender diversity has been achieved at the top levels of the organization, there is little incentive to retain other women at the top. Organizations are not interested in true gender equity, but in the minimum number of women needed to appear diverse.

This notion that organizations strive to achieve the minimum gender diversity necessary to avoid criticism and backlash has been found in other research. A study looked at all directors serving on the boards of S&P 500 companies. Researchers found that boards “played diversity” to please potential critics by appointing exactly two women to their boards. . In fact, 45% more boards have exactly two women than you would expect by chance. Once organizations had two women on their boards, there seemed to be little incentive to add a third. The study’s authors called this phenomenon of having exactly two women on corporate boards “twokenism.”

Corinne Post, a management professor at Villanova University who was not involved in the study of CEO gender and top executive compensation, offered a more magnanimous potential explanation for why female managers may earn less. under the leadership of female CEOs. She says that organizations that have female CEOs may be more committed to gender equity and are therefore more likely to be women accelerating the process. Women who rise quickly to senior management may earn less than other employees at the same level simply because they didn’t spend as much time getting there.

Whichever theory is correct, the fundamental problem is that there are still too few female CEOs and female managers. As the presence of women in senior leadership becomes less of an anomaly, hopefully any decisions about accelerating women or how to achieve diversity goals will no longer be relevant.

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