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Room for Improvement at the Top

Every day, millions of people go to work at companies, organizations, and institutions run by women. Over time, this may lead to a higher proportion of women CEOs.

There was a surprising finding in the Strategy& 2015 CEO Success study. In recent years, when the 2,500 largest companies in the world have chosen CEOs, a noticeably higher proportion turned to people who had not previously worked for the company. But hires of another type of outsider to the boardroom — women — have fallen sharply. Last year, only 2.8 percent of the 359 incoming CEOs at the world’s largest 2,500 companies were women.

The small total is both shocking and dispiriting. After all, in the U.S., women earn more than half of the bachelor’s degrees awarded, and in 2012, women comprised about 45 percent of the total labor force of S&P 500 companies. But for a host of social, cultural, and economic reasons, women don’t make it into the C-suite as frequently as they should.

I’d argue that norms and the personal experience of those making hiring decisions have something to do with the persistent shortfall. At very large companies, boards of directors make the ultimate decisions regarding whom to hire. According to Catalyst, less than 20 percent of the board members of S&P 500 companies are women. And the men who disproportionately populate these boards — most of whom are in their 40s, 50, and 60s — have spent their lives working in environments where women CEOs were explicitly not the norm. The number of board members who have ever worked at a company run by a woman CEO is presumably meager, simply because there have been so few to date.

The number of board members who have ever worked at a company run by a woman CEO is presumably meager.

In the 1990s, when many current board members started their business careers, I used to help Working Woman magazine compile a list of women in senior positions in corporate America: CFOs, presidents, division heads, CEOs. We had to look quite deeply into the S&P 500 list to find women who ran publicly traded companies. Generally those we found were at small, obscure companies, or had not been hired to run the company because they had founded it — e.g., Donna Karan, Martha Stewart, or Oprah Winfrey.

But for the young corporate hotshots of 2016, the reality and the norms are actually shifting. Today woman are running a host of truly massive global enterprises with huge employee bases. Woman are CEOs of gigantic, blue-chip companies like IBM (about 380,000 employees at the end of 2014); General Motors, the nation’s biggest car manufacturer (216,000 employees); beverage and snack giant PepsiCo (271,000 employees); food company Mondelez International (annual revenues US$30 billion); agribusiness giant Archer Daniels Midland ($67 billion in revenues); defense contractor Lockheed Martin, which has 125,000 employees and $46.1 billion in annual revenues; and Campbell Soup. More than iconic names or well-known brands, these companies are significant economic forces.

Now consider that women also have prominent CEO roles at other well-known organizations. The AARP, one of America’s largest nonprofits, is run by CEO Jo Ann Jenkins. Judith Rodin, the former president of the University of Pennsylvania, runs the Rockefeller Foundation, one of the largest philanthropies in the world. In many states and regions, universities are among the largest employers and economic forces. And you can find women as the top executives at many universities, including Harvard, Brown, and the University of North Carolina.

There’s more. Of the 50 states, six have women in the chief executive role of governor. And while woman may not have made many strides at the highest levels of banking, the Federal Reserve, the nation’s central bank, has a woman CEO: Janet Yellen. Oh, and one of America’s two major political parties seems poised to nominate a woman as its choice to be the chief executive of the United States government, which has annual revenues of about $3.5 trillion and 2.77 million employees.

If you add it all up, millions of people are going to work each day at companies, organizations, and institutions that are run by women. Whether they are starting out, or moving laterally in and out of companies and positions, a larger and larger percentage of the American workforce — men and women — are experiencing women CEOs as a norm. In time — five, 10, 20 years from now — some of these men and women will make their way into executive recruiting and boardroom positions. And when that happens, the conversation about whom to consider for the company’s CEO post will surely be more expansive.

Daniel Gross

Daniel Gross is editor-in-chief of strategy+business.

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