Female Managers Earn Less Than Female CEOs

by / ⠀Career Advice / March 16, 2022
Because organizations are gaming diversity, female managers earn less than female CEOs. according to the experts. Why is that?

Because organizations are gaming diversity, female managers earn less than female CEOs. according to the experts. Why is that?

Although the number of female CEOs has steadily increased over the previous decade, just 6% of the Fortune 500 businesses in the United States are women. It may seem natural that having a female CEO at the head of a firm would assist top female managers, but recent research reveals the reverse. A female CEO might be bad news for top female executives, at least in remuneration. Companies with a female CEO, according to the experts, may have less motivation to invest in other female managers.

How does this working relationship pan out?

Scientists from the Journal of Applied Psychology examined compensation data from the top management teams of 1,500 big U.S. corporations over 20 years. That is to say, public firms in the United States are obligated to publish information on the salary of their CEOs and four other highly compensated executives. Scientists utilized this information in the research.

The researchers observed that if a top female manager has a female CEO, her salary is around 16 percent lower than it would have been if she had a male CEO. It’s worth noting that this salary disparity is an average result that may not apply to every organization. Whether they worked for a male or female CEO, top male managers received the same.

This also is true.

When a woman is at the leadership of a corporation, why do female managers earn a shocking 16 percent less?

The researchers put two conflicting ideas to the test. One theory says that women in positions of authority are harsher than female subordinates. Therefore, a female CEO could be leaning to pay other women less.

Queen bees are women in positions of command who mistreat female subordinates. However, the researchers found that the data did not indicate those female CEOs perform like queen bees. As a result, the CEOs were unlikely to blame female managers for less pay.

Gender benders show up in hiring and retention.

Instead, they posit that evidence that companies with a female CEO are less likely to retain other top female executives.

Firms often support gender diversity and attempt to have female representation in senior management. Paying a top female manager extra to attract and keep her is a standard part of a company’s gender diversity initiatives. However, if the same company already has a female CEO, that woman may represent the company’s gender diversity objectives.

Consequently, other top female managers may be less on board in staying on.

According to the researchers, a female CEO may render the presence of other women on the [top management team] for diversity reasons extra, allowing the company to pay them less than it would have paid them if the company had a male CEO.

To put it another way, once a certain amount of gender diversity has been done at the highest echelons of an organization, there is little motivation to keep additional women there. Organizations are more into having the bare minimum of women look gender diverse than in actual gender parity.

Other studies reveal that companies aim for the bare minimum of gender diversity to avoid criticism and reaction.

Female leadership qualities

One research study looks at all directors sitting on the boards of S&P 500 businesses.

The researchers believe that boards were “gaming diversity” by adding precisely two women to their boards to appease criticism. Approximately 45 percent more boards than would be done by chance had precisely two women on them.

Organizations appear to have little motivation to add a third woman to their corporate board after two. The research authors coin the term “twokenism” to describe the tendency of having precisely two women on company boards.

Consider the thoughts of Corinne Post, a Villanova University management professor.

Post was not in the research on CEO gender and top manager compensation. She offers a more compassionate explanation for why female managers could earn less while working under female CEOs.

Post claims that companies with female CEOs are more likely to prioritize women because they are more partial to gender equality. Women who go up quickly to senior management positions may earn less than males at the same level since they haven’t spent as much time getting there.

What matters is that there are still far too few female CEOs and other senior executives, regardless of whether the theory is correct or not.

Furthermore, today women’s participation in high management becomes less of an outlier idea. Moreover, any considerations concerning women being fast-tracked or game diversity targets should become obsolete.

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