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The Gender Disparity of CEO Hiring and Firing

Datum:21 november 2018
The Gender Disparity of CEO Hiring and Firing
The Gender Disparity of CEO Hiring and Firing

Women are still under-represented in top management positions. The highest percentage of female CEOs in the Fortune 500 list until now was 6.4% in 2017. And although this percentage looks to decrease in 2018, it is still a big difference compared to around twenty years ago as, in 1995, there was not a single female CEO yet on the Fortune 500 list. At least we now have female CEOs, see figure below.

Percentage of Fortune 500 CEOs who are women
Percentage of Fortune 500 CEOs who are women

Source: http://www.pewsocialtrends.org/fact-sheet/the-data-on-women-leaders/#ceos

And something else befalls female CEOs, as a recent study has shown. They do not sit securely in the saddle once they have reached the top. Gupta et al. (2018) demonstrate that female CEOs have at least a 45% (!) greater chance of being dismissed. This remarkable study of 2,390 American firms shows that the dismissal of male CEOs depends directly on the company's performance. Simply put, men have a smaller chance of being dismissed when the firm performs well. Female CEOs, however, have a greater chance of being dismissed regardless of the firm’s performance. We already know that if a firm performs badly, everyone immediately looks at the CEO – irrespective of the fact whether it is a man or a woman. But this study shows that for female leaders, performance doesn’t seem to matter. Because also if the situation is more ambiguous and performance is not an evident reason for dismissal, they also get fired. The question is then, of course: what causes this remarkable difference in firing for male and female CEOs?

It could of course be that men are simply better leaders than women. But research has shown that there are not all that many differences between men and women in this respect. Moreover, when differences have in fact been found, women often score better regarding effective leadership styles (Eagly, Johannesen-Schmidt & Van Engen, 2003). A more logical conclusion therefore lies in the stereotypes that we apply to gender and leadership. Typically, women don't fulfil the image of the ideal leader. Since the 1970s, research has been done into the characteristics of the stereotypical ‘good leader’, and it appears that these are mostly masculine: a good leader is dominant, forceful and takes risks (see, among others, Stoker et al., 2012). These are clearly characteristics that we traditionally ascribe to men rather than to women. In addition, we also have stereotypical ideas about a ‘good’ woman: namely, someone who is caring, modest and supportive. So, women who want to be leaders are already two steps behind, according to research: they are not seen as ‘good’ leaders, and if they behave rather dominant and forceful – to match the leader stereotype, they are not seen as good women. It may therefore not come as a surprise that investors react more negatively to an announcement about the appointment of a female, rather than male, CEO. Also, start-ups launched by female initiators are deemed less promising than those of their male counterparts, resulting in fewer start-ups by women and lower investments into female-led firms (see Gupta et al, 2018).

The 45% greater chance of dismissal for female CEOs could well be linked to this phenomenon. When women are given top leadership positions, they are seen as less competent because they do not fulfil the stereotype of the good leader. Another possible and related explanation for the fact that female CEOs have a greater chance of failure, is the phenomenon of the ‘glass cliff’ (Ryan et al., 2016). The glass cliff phenomenon is when, in times of crisis, organizations are more inclined to appoint a female leader, because this situation fits with the stereotypical view of women and female leadership. In times of a crisis, the organization wants to try a different path and give a signal to the outside world that they have appointed an atypical leader (a woman): the helm has really been turned around! Furthermore, the leader needed in this crisis-situation should have more feminine leadership qualities, such as better communicative skills, and therefore a woman is asked to do the job. The chance of failure in these types of situations is, of course, high.

Research into women and leadership therefore points to stereotypes and gender bias as the most obvious explanation for the increased chance of failure for female leaders. When selecting and appointing a CEO, we are guided – consciously or unconsciously – by stereotypical views of what men and women can and should do, simply because they are male or female. This is bad news for female CEOs who, even if their organization performs well, have a greater chance of a bad assessment or even dismissal. But it is also bad news for all women who aspire to hold top leadership positions. In the media, the departure of a top female CEO is often linked to their gender, whilst the departure of a top male CEO is never mentioned in the headline as ‘a man has been dismissed at company X'. Recent research by Manzi and Heilman (2018) confirms that the departure of a female leader is indeed bad news for her potential female successors. When a male leader fails, there are no consequences for his potential successors: both men and women (with similar qualifications) are seen as suitable candidates. But if a woman is dismissed from a leadership position, then we assess a female successor with exactly the same qualities as a male candidate as being clearly less suitable. We seem to tie the failure of a female CEO to the fact that she is a woman: apparently, ‘women just can't do this’ quickly becomes the message. The stereotype turns into a self-fulfilling prophecy and has a negative effect on all the women who then try to become CEOs.

But there is also good news. While stereotypes are persistent, they are not completely unchangeable. Research shows that the image of an ideal leader is more a mix of masculine and feminine characteristics, for people who have a female leader and in work environments where female managers are not the exception (Stoker et al., 2012). All the more reason to take gender quota seriously and not just so as to increase the number of female leaders but in doing so, also to increase their longevity as a leader.


A summary of this blog is published in the Börsen Zeitung on December 5th 2018. 


References

Eagly, A. H., Johannesen-Schmidt, M. C., & Van Engen, M. L. (2003). Transformational, transactional, and laissez-faire leadership styles: A meta-analysis comparing women and men. Psychological Bulletin, 129(4), 569-591.

Gupta, V. K., Mortal, S. C., Silveri, S., Sun, M., & Turban, D. B. (2018, in press). You’re Fired! Gender Disparities in CEO Dismissal. Journal of Management.

Manzi, F. & Heilman, M.E. (under review). Breaking the glass ceiling: for one and all? 

Ryan, M. K., Haslam, S. A., Morgenroth, T., Rink, F., Stoker, J., & Peters, K. (2016). Getting on top of the glass cliff: Reviewing a decade of evidence, explanations, and impact. The Leadership Quarterly, 27(3), 446-455.

Stoker, J. I., Van der Velde, M., & Lammers, J. (2012). Factors relating to managerial stereotypes: The role of gender of the employee and the manager and management gender ratio. Journal of Business and Psychology, 27(1), 31-42.