Skirting the issues: a 'green ceiling' for entrepreneurs?
From the Briefcase: Research produced by America's Best Business Schools
Authors: Lyda Bigelow and Judi McLean Parks, Olin School of Business, Washington University in St. Louis
Status: Working paper.
Summary: Do investors really care whether a CEO is a man or a woman? Maybe so. A new study by two professors at the Olin School of Business shows that gender bias continues to dog female entrepreneurs.
The evidence of women's success in the corporate world is plentiful: Forty percent of businesses in the United States are woman owned; 20 million people are employed by woman-owned businesses; firms with women in top management positions often outperform companies that have few or no women in top-level jobs.
But two professors from the Olin School of Business at Washington University in St. Louis wondered whether women's evident prowess in business is something that most people generally recognize when making investment decisions. Their conclusion: Perceptions of female business leaders aren't keeping up with reality.
Lyda Bigelow, assistant professor of organization and strategy, and Judi McLean Parks, the Reuben C. and Anne Carpenter Taylor professor of organizational behavior, found that investors were overwhelmingly inclined to favor firms run by men over woman-run firms.
After constructing a prospectus for a company that was purported to be going public, Bigelow and McLean Parks distributed the document along with the CEO's bio to people educated in business finance and asked them if they would consider investing in the company.
The company outlined in the prospectus and the qualifications of the CEO were nearly identical except that half the participants received a bio of a female CEO and the other half of a male CEO.
"What we found is that the CEO's sex affected just about everything," said McLean Parks. "We asked what percent of their investment money they'd put into the firm. It was astonishing. Participants were willing to invest 300 percent more in a firm run by a male than in a firm run by a female."
When asked about compensation, respondents said they would pay the female CEO only 86 percent of the amount they would pay the male doppelganger.
"The thing that surprised me about these findings is that the participants were given identical materials. The only things that changed were the name and gender of the CEO, and with that, you get astonishingly different reactions," said Bigelow.
The response to female CEOs was reflected in more than just fiscal decisions, the researchers found. Overall, the female CEOs were evaluated more harshly in a variety of ways. Despite identical resumes, participants indicated that the female CEO in the fabricated company:
- Had significantly less leadership experience.
- Would be less able to resolve a deadlock on the board of directors.
- Would be less able to handle a crisis.
- Was less competent.
- Would be a less favorable representative of the company in the eyes of the public.
Latent biases
Participants also indicated that firms run by a woman would be riskier investments than firms run by a man and that the top management team would have more conflict under a female CEO.
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