Observable signals of professional and educational qualifications are more important for women’s career advancement than men’s, finds new research from the University of Mannheim Business School (UMBS).
Prof. Alexandra Niessen-Ruenzi, Chair of Corporate Governance, and PhD candidate Leah Zimmer, both of the UMBS, analysed the biographic information of 103,461 directors. They investigated two categories of skill signals: signals of higher education (e.g., degree levels and whether they graduated from a Top 50 US college) and signals of professional experience (e.g., general management skills from past work).
They find that signals of higher education and professional experience increase a male director’s probability of entering a leadership role by 5.9%, and their pay by 6.8%. Female directors with these signals are 12.9% more likely to enter a leadership position, and their pay is 21.2% higher.
These findings are relative to the different baseline probabilities for men and women to reach leadership positions, acknowledging the fact that women are less likely to reach leadership positions or receive higher pay compared to men to start with.
As female and male directors in their sample are equally qualified, this suggests female directors are held to higher standards when it comes to filling a leadership position.
“We also show that observable skill signals are more important for female directors if the hiring decision is made only by men, and after sudden CEO death, when search committees need to find a new CEO under time pressure,” explains Prof. Niessen-Ruenzi. “Our results are also stronger for female directors entering a leadership position from outside the company, and for firms headquartered in states with conservative gender norms.”
These results are in line with models of screening discrimination, where women need to provide more observable skill signals as employers find it more difficult to judge their unobservable qualifications for a leadership position, such as emotional intelligence, communication skills, creativity, critical thinking, and adaptability.
As long as there are different baseline probabilities for men and women, equally qualified women are expected to collect more observable skill signals than men to improve, but not eliminate, gender gaps in leadership and pay.
These findings were published as a European Corporate Governance Institute Finance Working Paper.