As recently as 1971, a woman had never run a Fortune 500 company. That changed the next year when Katharine Graham became CEO of the Washington Post Co. An African American didn’t get the top job until 1987, when Clifton R. Wharton Jr. became CEO of TIAA-CREF in 1987. But, despite the decades since those milestones, we haven’t progressed terribly far.
Women today are about half the workforce—but they’re largely in the bottom and middle rungs of the economy, making up nearly two-thirds of minimum wage workers and a little over half of management and professional employees. The workforce is also 16 percent Hispanic and 12 percent black, yet people of color similarly dominate the lower two thirds of the ladder; 60 percent of these workers make minimum wage or slightly above.
This means the top of the pyramid is still very pale and very male. Women make up less than 15 percent of the executives at the country’s largest companies and less than 17 percent of their board members. Even fewer make it to the very top role: They account for just 5 percent of the CEOs at the 1,000 largest companies. People of color are even more rare in this role: There are just six black Fortune 500 CEOs and ten Hispanic CEOs.
These numbers are more than just an embarrassment in a country that likes to think of itself as a meritocracy. The situation is also hurting the economy and businesses themselves. A study that looked at the expansion of career opportunities for women and people of color since 1960 found that the fact that companies had a wider, more diverse pool of talent to draw from increased aggregate economic output by 15 to 20 percent. A large number of other studies have found that companies with gender diverse boards and leadership far outpace those that just rely on men. Imagine what would happen if the upper echelons of the workforce resembled the rest of the country.
Some business leaders have looked at the way things stand and realized they’re bleeding talent. In law, for example, women are well represented in entry-level jobs but peter out the closer you get to the top. But Gianmarco Monsellato, head of the French firm TAJ, didn’t want to lose his female workers. So he made it a personal priority. As Avivah Wittenberg-Cox writes at the Harvard Business Review, he went about it very deliberately and thoroughly: “He was involved in every promotion discussion. … He personally ensured that the best assignments were evenly awarded between men and women. He tracked promotions and compensation to ensure parity. If there was a gap, he asked why. … When clients objected, he personally called them up and asked them to give the lawyer three months to prove herself.” Today his firm, which is number five in France, is evenly split between genders at all levels.
This is a trend among companies trying to become more diverse. Catalyst, a nonprofit focused on shrinking the gender divide, holds a CEO summit every year with some of its hundreds of member companies. At this year’s, “One theme that was consistent across the board was intentional leadership and that it begins at the top,” Brande Stellings, vice president of corporate board services at Catalyst, said in an interview. “It really started at the top, with the leader saying this is a priority.”
For another example, the personal-care behemoth Kimberly-Clark, whose board is 25 percent female and received an award from Catalyst this year, made developing diverse talent one of the metrics by which it judges its leaders across the globe. It even tied bonus money to it. “They said that to be an exceptional leader at Kimberly-Clark, you have to develop talent that doesn’t look like yourself,” Stellings reported. The company also required that at least one person interviewed for every position above a certain level be diverse in some way.
Lockheed Martin, another company to receive an award, came up with a different approach given how male-heavy the defense industry is: It decided to engage all of its male employees in tackling the problem through workshops and other initiatives.
Not all companies, of course, are focused on this problem or even convinced that it exists. If they were, the numbers wouldn’t be changing at such a glacial pace. And even some companies that believe diversity makes business sense often complain about a pipeline problem (examples include tech companies like Facebook and Google), or they simply don’t know how to go about changing the status quo.
So voluntary efforts aren’t going to do it alone. In other countries, the government has decided to step in, either with strict requirements or firm nudges. Seven countries—Finland, France, Iceland, Italy, the Netherlands, Norway, and Spain—have enacted quotas that require a percentage of their companies’ boards to be female by a certain date. Germany is likely to come next, and the entire European Union could soon follow. (Most countries have so far only set targets for boards. But Japan, for one, has a goal for its companies’ C-suites: 30 percent female by 2020.)
Given that these are firm requirements with strict deadlines, the share of women on boards has jumped significantly, particularly in Norway, which was the first to enact a quota in 2003. And while businesses in that country originally balked at the plan, arguing that they would have to hire under-qualified women to comply, a new study found that the qualifications of the country’s female board members significantly improved after it was instituted.
The effects of diversity on boards also seem to spill out into the C-suite, like in Norway where a greater share of women on the board increased the share of women who were top earners within the company. A Catalyst study similarly found that American companies with more women on their boards ended up with more women in their C-suite. The study on Norway does come with a caveat, though: Increased diversity on boards didn’t improve the prospects for women further down the food chain. Nevertheless, the quota still accomplished the narrower goal.
Other countries are taking more informal, less legislative approaches. In 2011, the British government set a goal of having boards be 25 percent female by the end of 2015. Since then, the share of board seats held by women has reached nearly 19 percent, the highest ever, even though there is no real enforcement or penalty system. And in 2010, Australia’s financial market, the ASX, included an amendment to its corporate governance principles and recommendations that companies disclose gender diversity goals and the progress they’ve made in their annual reports. In the eight years before the change, the share of women on Australian boards hovered around 8.5 percent. It’s now jumped to 12.3 percent.
The United States doesn’t do any of this. The only rules regarding gender diversity are ones implemented by the Securities and Exchange Commission in 2010 that say companies have to disclose information about how they consider diversity when they pick board members. But the definition of diversity is so flexible that it doesn’t even have to mean gender or race. Worse, over 60 percent of companies fail to comply.
One thing that’s certain not to work: putting the onus of creating more diverse leadership back on the women and people of color that the companies need to cultivate. Wittenberg-Cox writes that most law firms have for years relied on “women’s initiatives, networks, or mentoring programs that have done little to increase the percentage of women reaching the top.” The “fix the women” approach, as she calls it, hasn’t done much. Women have gone from accounting for 16 percent of law equity partners in 2006 to the current 17 percent. Instead, we need change that’s statistically significant.
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