Women, in the U.S. at least, are currently riding the crest of a historically significant change.
“Outsiders” are slowly replacing “insiders” in leadership, visible positions. To wit, Harriet Tubman, African-American former slave, abolitionist and Civil War Union spy, will replace former slave owner Andrew Jackson on the face of the $20 bill. Other women such as Eleanor Roosevelt and Susan B. Anthony will be featured on the obverse sides of other bills. It’s being called the biggest change in U.S. currency since Martha Washington graced the $1 silver certificate more than a century ago.
This outsider trend is not confined to U.S. Dollars. The latest CEO Findings on Women CEOs in the 2015 CEO Success Study by PwC/Strategy& shows that in planned CEO successions in which outsiders were chosen, women were more often hired than men – 32% vs. 23% of the total between 2004-2015. (Access the full report here.)
Fewer Women CEOs
But despite this trend, the study of 2500 global publicly-listed companies showed that only 10 women were among the 359 incoming CEOs at the world’s largest companies last year – 2.8%, the lowest share since 2011.
Overall, the study shows CEO turnover last year at a record high of 16.6%, compared to 14.3% in 2014. “Outsiders” accounted for more than a fifth of those CEOs hired in planned turnovers between 2012-2015 – nearly double the rate for the previous four-year period (2004-2007). However, the study also shows these outsider CEOs were more likely to be forced out than insiders, though the gap is narrowing: 21% of CEOs forced out between 2012-2015 were outsiders compared to 16% of insiders, while during the period 2004-2011 the ratio was 32% to 21%, respectively.
Not surprisingly, industries in some distress — those whose financial results had been less than spectacular or whose business had been “disrupted” (i.e., financials, telecoms, utilities, healthcare, energy) – sought outsiders as CEOs. The study shows that outsider CEOs were more likely to have had international experience (28%) and be of a different nationality than the company’s headquarters’ makeup.
Women Are Better Outsiders
The inference: Women stand a better chance of becoming a CEO as an “outsider” at different company, particularly if circumstances forced board members to widen their search (the “you can’t be a prophet in your own land” theory?), but they also are in the front lines when it comes to ditching the outsider.
The financial industry hired the largest number of outsiders as CEOs (92% during the latest period surveyed) — not surprisingly, considering the sector’s state of affairs since the 2008 financial crisis. Women figured most prominently as CEOs in consumer sectors (though still in the single-digits) and least in the materials sector.
The U.S. and Canada hired the largest number of female outsider CEOs from 2004-2015 – but that number was only 4%. China is a fast second at 3.7%, and Japan was at the bottom of the list at 0.9%.
Western European companies were twice as likely to search for an outside CEO particularly if corporate financial results had been less than stellar; however, these outsider CEOs were also more likely to be forced out.
Indeed, low corporate performance was an overall leading factor in choosing outsider CEOs. Other reasons – both for and against hiring an outsider for the top position – seem to support the theory that “like chooses like.” For example, the study showed that an outsider was more likely to be chosen as CEO if the board chairman did not have CEO experience in the same company and if the former CEO in a planned succession was also an outsider. Insiders were more likely to be chosen as CEOs if the board chairman was hiring his first CEO at the company, if the former CEO had had a long tenure and if the company was large.
Other trends for 2015 show that the de facto selection process is not supportive of hiring women in top positions:
The survey does show that the trend to choose outsider CEOs is real and considered, rather than an example of desperation by a board backed into a corner. Another fact supporting the choice of outsider CEOs: the survey shows that for the third straight year, outsider CEOs have delivered higher median total shareholder returns than insiders.
So women, it appears, have a better shot at the CEO position when corporate boards widen their search criteria for any number of reasons. But there is an overall lack of women high enough on the corporate ladder from which to choose.
As Ashley Unwin, PwC’s U.K. & EMEA Consulting Leader and U.K. Executive Board Member, opines, “Companies should be challenging themselves on why they don’t have more women poised to take on executive level roles. They should work to identify and build their future pipeline of women leaders, and continue to monitor their progress. The executive level is where women and diverse leadership teams can make a tangible difference to the culture and management of a business.”
The design changes putting Ms. Tubman on the face of the U.S. $20 bill will be revealed to the public in 2020. It’s not an inconceivable deadline to see the faces of more women in the global corporate CEO roster.
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