Most people would probably guess that the upper echelon of corporate America is an exclusive, virtually males-only club. And they’d be right. A new Institute for Policy Studies report shows just how exclusive this club is.
Over the past two decades, there are only five instances of women ranking among the top 25 highest-paid CEOs. That means women comprise a grand total of 1 percent of our nation’s top-paid chief executives. Meanwhile, the percentage of women in Congress, while still low, rose from 10 to 18 percent in the same period.
Women are virtually absent from all corner offices, even at companies that bestow less lavish pay packages on their chief executives. A report examining every CEO on the 2012 Fortune 500 list revealed that last year only 3.8 percent of these CEOs were women.
Institute for Policy Studies, 2013 Executive Excess report
What explains this disparity? Are men just that much better at running huge corporations?
The IPS study, which I helped research, shows just the opposite. Of the CEOs who made the 25 highest-paid lists in at least one of the past 20 years, 38 percent performed poorly — even by the narrowest definition.
Twenty-two percent led companies that either crashed or got bailed out after the 2008 financial crisis. Another 8 percent led companies that paid massive settlements for fraud. And yet another 8 percent wound up getting fired.
The women who barged into this otherwise all-male club didn’t leave particularly stellar records. Two of the four who broke this glass ceiling wound up getting fired. Andrea Jung of Avon got the boot in 2012 after three years of declining profits at the cosmetics giant. She had made the list of the 25 highest-paid CEOs twice, first in 2004 and again in 2008. Her compensation totaled about $26 million in both of those years.
The second woman to be fired: Carol Bartz, former CEO of Yahoo. She made the list in 2009 — her first year in the job — with a $45 million pay package. Two years later, she was discharged for failing to boost the media company’s advertising revenue.
Marion Sandler, who ran Golden West Financial with her husband, Herbert Sandler, made it into the highest-paid CEO list in 1998 with $18 million in compensation. A decade later, Time magazine included both Sandlers in a “top 25 list” of a different sort: “25 People to Blame for the Financial Crisis.” Golden West’s aggressive subprime mortgage lending generated billions for the couple and helped prompt Wachovia’s collapse.
What’s the lesson from these foibles? Inconceivably high pay levels apparently aren’t connected to strong CEO performance —whether the chief executive is a man or a woman.
U.S. corporate culture rewards reckless and value-subtracting behavior. After leading companies to the brink of bankruptcy or embroiling them in expensive fraud cases, most CEOs got away with little or no consequences. In fact, those who got the boot walked away with golden parachutes that averaged $48 million.
Over the next 20 years, more women need to become leaders at the pinnacle of corporate America. The overwhelming male membership in the CEO club is an embarrassment at a time when women are gaining greater equality in most professions.
Equally important, our corporate culture needs to change the way it compensates all chief executives. Male and female CEOs alike shouldn’t be richly rewarded for performance that devastates the long-term health of their companies and the broader economy.