Over the past few decades, chief executive officer (CEO) pay has risen spectacularly, as has debate regarding why this has occurred and whether policy should or can correct it. Yet one glaring fact about the C-Suite eludes much of the corporate governance literature and executive compensation policy reforms and proposals: The C-Suite, particularly the CEO role, has long been and continues to be dominated by men.
Despite making up half the workforce, few women lead companies in corporate America. Only 8 percent of CEOs of Fortune 500 companies are women, and women make up less than a quarter of C-level executives. Women typically find themselves in “pink collar” C-Suite roles, such as head of human resources or legal. Not only do such positions rarely lead to the top, but they rarely constitute the highest-compensated positions within corporations.
Ample evidence shows that when women come to dominate a profession, the salary of that profession drops. This is particularly true in high-paid white-collar jobs. In a recent essay, published in Inequality Inquiry, we pose the question of whether the opposite proves equally true: As men dominate a profession, does the salary of that profession rise? Might masculinity be the culprit behind increasingly outrageous CEO compensation?
The essay begins to explore the correlation between executive compensation and men’s domination over senior executive roles, focusing on the CEO position. We delve into various theories that could help explain why men dominate the most lucrative role in corporate America. We argue that law and corporate governance need to account for these theories in designing solutions that address gender disparity in the CEO role.
How Do Men Monopolize the Most Lucrative Corporate Work?
While we cannot assert a direct correlation between men’s near-monopoly of CEO positions and their extreme compensation, we suspect they are linked. Given the paucity of research on this topic, examining this possible correlation requires engaging in theoretical analysis.
Masculine Traits in the C-Suite
A significant body of research on public company CEOs – the vast number of whom are men – suggests that hubris, overconfidence, narcissism, a desire to build empires, rivalry, and envy (such as a desire to keep up with peer CEOs) affect CEO decision-making. These traits often masquerade as leadership skills. Studies have found that overconfident executives have “a higher likelihood than a rational manager of being deliberately promoted to CEO.” Rather than producing better outcomes and effective leadership, evidence indicates that masculine leadership traits foster toxic work environments.
Nevertheless, these “masculinity norms” shape perceptions about the necessary attributes for leadership as well as corporate cultures. Moreover, they affect power structures and hierarchies within corporations, undermining the potential success of women in the executive ranks, especially those seeking to rise to the CEO level. Thus, workplace cultures at many firms resemble a masculinity contest: “[a] zero-sum competition played according to rules defined by masculine norms (eg displaying strength, showing no weakness or doubt).”
Under these conditions, women are punished, no matter whether they conform or refuse to adhere to such norms. Traditionally masculine attributes, including dominance and assertiveness, are seen as necessary for leadership, but when women are assertive or decisive, they are viewed as unlikable. Professors Carbone, Cahn, and Levit argue that, over time, this creates a “triple bind” scenario where women “become less likely to apply for such positions and thus more likely, individually and as a group, to be perceived as lacking what it takes to succeed in such environments.”
As people of different genders enter into corporate competition, the question remains: How will they, with their distinct, gendered traits, respond to the competition into which they’re placed to attain corporate leadership positions? Tournament theory elucidates their situation.
Tournament theory describes a compensation scheme in which competitors obtain “prizes” depending on their relative position within an organization rather than their output level.
Whereas in most tournaments men and women compete similarly, scholars have found that in some contexts in which outcomes were “uncertain” (unknown numbers of winners, but known probabilities) or “ambiguous” (unknown probabilities for different numbers of winners), men outcompete women substantially. This favors men in substantial ways but not necessarily in ways that benefit the firm. Likewise, when tournaments involve “competitive pressure,” women also participate less, and thus win less often as well.
Capture Theory: Maintaining Control over Resources
We then theorize that male tournament winners for CEO and executive leadership positions seek to eliminate their competition and lock in their gains. Indeed, the compensatory rewards for CEO spots give men – primarily white men – an incentive to keep the executive labor market tight. Part of how they achieve this is by excluding those who are not white men. This phenomenon may also explain the paucity of women executive officers and why corporate leadership has been so slow to change. The combination of low accountability and the peculiarities of high deference in corporate governance certainly prevents rapidly including more outsiders, whether women or people of color.
What Role for the Law and Corporate Governance?
We argue that antidiscrimination law cannot help victims of discrimination in elite job markets. Formally, the rules still apply, but plaintiffs justifiably fear backlash – perhaps even blacklisting – for raising claims of discrimination. Bringing a claim could mark the discrimination victim as unable to manage conflict, and few firms wish to incur the risk of hiring someone who may prove meddlesome. Potential plaintiffs might also fear that claims of sexism would convey an inability to work as men do, severely limit their career options, or lead to retaliation and dismissal.
Apart from overt, conscious bias – for example, around parenting – unconscious bias may also prevent the rise of women up the corporate ladder. As a result, despite a plethora of corporate rules against sex discrimination, companies continue to exclude women from leadership and distribute power and resources to leaders who are men.
Corporate Governance Reforms
Corporate governance rules and regulations depend on market forces and market actors to monitor and discipline firms. Board diversity has prompted more discussion of gender inclusion in the firm, but it is diversity beyond the board – arguably both more important and more difficult to achieve – that primarily merits our attention.
Nevertheless, board diversity holds some promise for more inclusive corporate leadership. Board leaders are often deeply involved in CEO selection. Moreover, research indicates that board diversity, particularly the presence of influential women directors, affects both the appointment and success of women CEOs. Thus, in addition to adding women to boards, it may be critical to have women board members hold heretofore-elusive board leadership positions.
With respect to CEO pay, the compensation committee plays a significant role. As to whether women board members influence executive compensation, some research suggests that gender-diverse compensation committees can reduce excessive CEO compensation.
Greater transparency and disclosure may also prove fruitful in adding diversity to the C-Suite. Over the last few years, several large institutional investors have pressured companies to disclose diversity metrics at the management level. Moreover, a few shareholder proposals have urged companies to include diversity targets in compensation packages of senior executives. While important in general, the disclosure urged by institutional investors does not ask companies to disclose specific metrics that connect the composition of the C-Suite with the pay of C-Suite members.
Finally, shareholder litigation particularly against large companies such as Facebook, may also help to hold companies that lack diversity accountable. However, this litigation has up until now focused on representation broadly and is unlikely to change incentives for promotion at firms in any meaningful way.
Although the number of women in middle management has increased substantially, the C-Suite’s continued domination by men remains stark. By linking an understanding of how masculinity works in the C-Suite with tournament theory and capture theory, we sketch an idea for how men have executed this power play. Yet, without empirical evidence testing our theories, we do not know exactly how men engineer the competition to capture these posts.
While antidiscrimination law may prove a limited forum for rectifying inequality in corporate elites, improvements to corporate governance may prove more fruitful. Understanding the theoretical correlation between male domination of the C-Suite and the extraordinary compensation for such positions may expose other ways to improve governance with regard to inclusion and to counter C-Suite sexism.
 See Anand M. Goel & Anjan V. Thakor, Overconfidence, CEO Selection, and Corporate Governance, 63 J. Fin. 2737, 2737 (2008).
 Jennifer L. Berdahl, Marianne Cooper, Peter Glick, Robert W. Livingston & Joan C. Williams, Work as a Masculinity Contest, 74 J. Soc. Issues 422, 424 (2018).
This post comes to us from Afra Afsharipour. a senior associate dean for academic affairs and professor of law at University of California, Davis School of Law, and from Darren Rosenblum, a professor of law at McGill University. It is based on their recent paper, “Power and Pay in the C-Suite,” available here. A version of this post appeared on the Oxford Business Law Blog.