New Clues To The Pay And Leadership Gap

Women continue to climb the corporate ladder. According to Catalyst, a nonprofit research and advisory organization working to advance women in business, women now hold twice as many senior management positions in large American companies as they did in 1995. Yet despite such progress, women occupy only about 16% of such positions and 13% of board of director seats in U.S. corporations -- and the percentages are even lower in the rest of the world. Moreover, top leadership of large public companies remains almost universally male. In the U.S., only six of the CEOs of the Fortune 500 are female. According to Graef Crystal, a corporate-pay expert, women occupy only about 5% of the top five slots and 2% of the chief executive slots in U.S. public companies with net sales above $5 billion.

The good news, says Crystal, is that those women who do have the top job are paid every bit as generously as their male counterparts. Both business size and rank within the top five leadership slots affect an individual's compensation level, but gender does not. Crystal finds no evidence that top female execs suffer from pay discrimination in large American companies. The problem for women is breaking through the glass ceiling, not getting equal compensation once they do so. So a nagging question remains: Why do so few women make it to the top corporate echelons?

As an economist and business-school dean, I have asked myself this question many times. Recently, I have discovered fascinating new evidence that suggests some answers. First, women and men appear to have different attitudes toward competition. Scholars led by Uri Gneezy at the University of Chicago Graduate School of Business have found that competition enhances male performance but does not affect female performance. Men complete more tasks when payment goes only to the individual who completes the most tasks than when payment depends simply on the number of tasks completed. Women's performance is the same in both. Boys run faster when paired against other boys and faster still when running against girls than when running alone. Girls run at about the same pace in all three circumstances. And despite modern companies' official embrace of teamwork, getting to the top remains a highly competitive process that rewards individual performance. So men do better.

Second, both experimental and survey research show that men are much more likely than women to negotiate for pay, promotions, and recognition in the business world. In her compelling new book Women Don't Ask, professor Linda Babcock of Carnegie Mellon University reports that only 7% of female graduates from master's degree programs at Carnegie negotiate for a higher salary than the one initially offered by a potential employer, while 57% of male graduates do. And negotiating pays off: The starting salaries for male graduates are more than 7% higher than those for females. Babcock finds that different negotiating styles explains most of the gap in women's starting pay, and this gap explains a large part of the persistent pay differential between men and women throughout their careers.

Higher pay is also assumed to mean better performance, so individuals with identical experience and performance records but stronger compensation histories are more likely to receive positive work evaluations and be offered more promotion opportunities. And since women are much more likely than men to believe that working hard and doing a good job will earn them advancement, they are much less likely than men to negotiate for such promotions -- and thus much less likely to receive them. The reluctance to negotiate may explain why women often fail to get the pivotal assignments that lead to the corporate boardroom.

In addition, Catalyst reports that a third of professional women not yet in the most senior leadership positions do not want them. Why? Because to get to the top, they often have to give up having children or spouses. According to the National Parenting Assn., 42% of female corporate execs aged 41-55 and 49% of women earning more than $100,000 per year are childless.

This may change. Women now get more than half of all bachelor's degrees and master's degrees, half of all law degrees, and about a third of all MBA degrees at U.S. universities. The number of women reaching leadership jobs just below CEO level is rising fast. As women gain influence, they are likely to champion changes that ease the trade-offs between work and family. As a business school dean, I am optimistic about the future of women in business.

By Laura D'Andrea Tyson

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