Industries Leading the Charge for Female Leadership Within the Fortune 500

Anna Bradley-Smith · October 7, 2020
Female CEOs

With Linda Rendle recently taking over as CEO of Clorox, the Fortune 500 has an all-time high of 38 female CEOs. And if nothing changes between now and February, the list will climb to 39 when Jane Fraser claims the corner office at Citigroup.

That means women now account for 8% of the top spots at Fortune 500 companies, which although a positive increase, highlights how far there is to go. The case is especially poignant for women of color, who only hold CEO roles in three Fortune 500 companies, and none of those women are Black.

Women make up only a fifth of C-suite jobs in Fortune 500 companies despite accounting for almost half of entry-level workforce positions. In 2015 there were more CEOs called John running major US companies than there were women. The number of female senior leaders is tracking up, but the slow pace remains concerning to many.

Female CEO Graphic 2

Joining the ranks

Katherine Graham was the first woman to lead a Fortune 500 company, becoming the chief executive of The Washington Post in 1972. By 2000, the Fortune 500 had two female CEOs. That number grew to 15 by the end of the decade.

Recently, there has been a real push to diversify top tier leadership and in the last decade the number of female CEOs has more than doubled. Companies, boards and society have reacted not just to the injustice of the situation, but to the positive effects female leadership can have on a company – both financially and culturally.

Today, the retail and financial sectors are leading the pack in the Fortune 500 with the highest proportions of female CEOs. In retail, seven of 48 companies are led by women and in financials it is seven of 91.

Tech is in third place with four companies of 44 led by women. And in fourth place is energy, which has three companies out of the 60 listed on the Fortune 500 led by women.

Tied for fifth place with two women-led companies each are aerospace and defense, food, beverage and tobacco, household products, and wholesalers.

Female CEO Diversity Chart 1

What is stopping more women reaching higher rungs?

With women outnumbering men on college campuses since 1988 and earning 57% of undergraduate degrees and 59% of master’s degrees, it’s clear a lack of qualifications isn’t the issue. Instead, a number of factors work against women – including high levels of unconscious bias.

A 2018 study undertaken by Florida State University professors showed companies led by women and men took similar levels of risk and earned similar profits, but those run by women had smaller investor returns, suggesting investors put a lower value on share prices of those companies than they should have.

When a woman is appointed to turn a company around and fails, she is often blamed for being distracted by other factors (think Marissa Mayer of Yahoo). But when a man is in charge of a failed turnaround the attitude often changes to the company having been unsalvageable.

In another study conducted by The Female Quotient in 2017, the majority of respondents said a man was best suited to lead a massive organizational change.

Unconscious bias

But there are few women even high enough on the corporate ladder to be considered for a CEO spot. A McKinsey report found the lack of promotion to managerial positions early in women’s careers excluded them from the path to leadership and has resulted in the current situation.

"Women are often hired and promoted based on past accomplishments, while men may be hired and promoted based on future potential," the authors wrote, adding that could come down to gender bias. The authors said giving unconscious bias training to those who conduct performance reviews could help remedy the situation.

Lorraine Hariton, CEO of Catalyst, said companies had to work with intention to promote women internally and hire and promote without bias to change the culture. “It’s a slow process,” she said.

And it is largely the bias that is slowing it down. Lean In President Rachel Thomas told Mic. that women and men tended to overestimate men and underestimate women, “History tells us men are leaders, so people have that expectation."

Sherly Sandberg wrote in The Wall Street Journal we expect men to be assertive and lobby and lookout for themselves, and we expect women to be communal and collaborative. When women take on the characteristics typically assumed of men, they were seen unfavorably, Sandberg added.

That stereotyping also means women are seen as lacking the qualities associated with being an effective leader, such as aggression and ambition. A contributing factor to this could be early socialization, where boys are more readily encouraged to take risks, compete and lead than females are.

Then there is the issue of family duties.

Work-life balance

When Indra Nooyi stood down from PepsiCo she told CNBC that while she had been blessed with an amazing career, there were moments she wished she had spent more time with her children and family.

Her comment highlights a reality many women face in advancing their careers: It is extremely difficult to balance working in high level management with parenting. And research shows maternity leave and absences for sick children hurt women’s careers more than men’s, and often family commitments led to them to opt out of pursuing top jobs.

Although paid parental leave is essential to removing career barriers for women, a study released by Ball State University in August this year found only 72% of the 353 Fortune 500 companies who responded had paid parental leave policies. Of those, nearly 50% offered at least twice as much paid leave to mothers than fathers.

Professor Richard Petts, who co-authored the report, said that led to gender inequality both at work and at home, reinforcing the idea women should be primarily responsible for childcare.

Although there was still a very long way to go in elevating women, Catalyst CEO Lorraine Hariton said things were moving in the right direction. “We can’t assume that it’s just going to happen. It takes great intentionality.”

Benefits in diversifying

An increasing amount of research shows the benefits of having women in top leadership positions, highlighting how elevating women is not just the right thing to do, but is a smart business decision.

A number of studies have shown women’s strength in leadership skills compared to men, and those skills can lead to broader communication and networking within companies and stronger leadership at all levels. Gender and ethnic diversity has also been shown to improve company returns by 35% above the industry average due to the effects on brand image and customer, employee and shareholder satisfaction.

Increasing diversity increases the perspectives and ability for critical thinking and problem-solving within leadership teams. It has been proven diverse boards respond more creatively to market and customer needs, increasing innovation. When companies lack female leadership, it highlights the underutilization and understanding of the skills women leaders can bring to the table – including their different approaches to mentoring (which can lead to a more engaged and motivated workforce.)

Women in senior leadership also results in more women at the level directly below, research shows. That could come down to there being more positive role models and better staff development practices.

Making change

In order to speed up the process of increasing female representation at top corporate levels, California became the first state in the United States to pass a gender quota for boardrooms of publicly traded companies.

Under the law, companies need to have at least one female director or face a $100,000 fine. By 2021, companies with a five-member board must have two female directors and at least three female directors on boards of six or more.

The law cites studies showing critical mass changes the environment to one where women are no longer viewed as token. The Female Quotient CEO Shelley Zalis told NPR there was a 30 percent rule, “When you have a minimum of 30%, that's when you see a transformation of culture and a true transformation of how business operates. But we have to start somewhere."

Other states are also looking to implement a quota system for corporate boards, but doing the same for executive teams has proven a less popular idea.

“Quotas are really difficult to justify in a competitive marketplace,” University of Kansas Economics Professor Donna Ginther told The Washington Post. “We typically do not tell private-sector companies how to do their business. As long as they are not breaking the law and they are producing goods for market, we leave them alone.”

Some also argue quota systems can give the perception of women being token.

Not in dispute is the need for companies to give women the same opportunities to climb the corporate ladder as they do men. That means mentoring, equal paid family leave and anti-bias training as part of a comprehensive approach to making sure women have opportunities for career growth.

And companies have good reason to do so. Including equality and diversity as a metric for operating will not just lead to improved company culture, but has also proven to be beneficial for the bottom line.

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