Overcoming gender bias of boardroom gatekeepers

It’s encouraging to see that women outperform men in some professional contexts.

For instance, research shows that female artworks fetch higher prices at auction. Female nominees for board of directors’ positions receive more votes from shareholders.

But women make up less than 20 per cent of corporate board members globally. And only four per cent of auctioned artwork is created by women.

The fact that women are still underrepresented here despite outperforming men suggests that there are barriers that are preventing women from competing on an equal footing with men.

On a positive note, buyers and investors seem to recognise that women face these kind of barriers.

But why don’t we see more women in contexts where they outperform men? Part of the answer lies in the significant role played by gatekeepers – these are evaluators with substantial influence.

If these gatekeepers exhibit bias against women, they can create obstacles for women in their career paths.

Numerous studies across different contexts suggest that gatekeepers indeed apply different standards when evaluating men and women.

For example, female PhD students receive less favourable recommendation letters than their male counterparts from their advisors. Similarly, female economists receive less credit for collaborative work with men and female financial advisors are more likely to be fired for an incident of financial misconduct than men.

So, what can regulators and organisations do to discipline gatekeepers and ensure that they evaluate women and men by the same standards?

GENDER QUOTAS

One potential approach is to reduce the decision-making power of gatekeepers and establish quotas that mandate a certain percentage of women in companies.

For example, the board of directors plays a crucial role in determining the composition of the board. A gender quota would limit this decision-making power.

But gender quotas often receive criticism and are frequently met with a negative response in the stock market. This negative market response is usually interpreted as shareholders’ concerns regarding the availability of qualified women candidates.

Our working paper challenges this notion.

We looked at the 2018 California board quota and found that shareholders did not oppose the appointment of quota-mandated women to boards, but rather disagreed with how boards adjusted their composition to comply with the quota.

California was the first state in the US to impose a binding gender quota for corporate boards, requiring companies to appoint at least one female director by the end of 2019.

The quota successfully boosted the number of women on company boards, increasing the board seats held by women from 13 per cent in 2016 to 24 per cent in 2020.

To understand shareholders attitudes towards quota-mandated female nominees, we analysed the voting results in annual shareholder meetings for each individual nominee around the quota announcement.

We found that, despite the significant increase in new female board nominees after the quota, voting support for these new (mandated) female nominees declined to a level that was comparable to, but not lower than, the support for new male nominees.

We then investigated how companies adjust their board composition when adding a woman to comply with the mandate.

The negative market reaction was concentrated in firms that replaced a highly supported incumbent male director, when adding a woman to the board to meet the quota.

Our results are important because they show that it’s the board itself – rather than shareholders – that acts as a gatekeeper keeping women out of the boardroom. And shareholders do not show a bias towards female directors, even when they are mandated by a quota.

STATUS AND SCRUTINY

Another potential way for organisations to address gender bias among gatekeepers is by increasing scrutiny on their decision-making.

In another study, we analysed restaurant reviews on the US online review platform, Yelp, and found that shining a spotlight on evaluators through a status award disciplines them and makes them more careful evaluators.

Our analysis was based on 1.6 million restaurant evaluations, where diners act as gatekeepers of restaurant quality by leaving reviews about their experience. Evaluators review restaurants by submitting a star rating from one star (worst) to five stars (best) and a free-form text justifying their assessment.

This study focused on the relationship between an evaluator’s rating and whether their review text identified that they were served by a man or a woman.

We used Yelp’s evaluator status award – the Elite designation – to analyse whether gender bias in the star ratings awarded to restaurants decreases after an evaluator receives this status award. The Elite designation is a sought-after status award that is given out by Yelp to a small number of evaluators.

And we did find a gender bias in restaurant reviews.

Non-Elite evaluators rated a restaurant 0.13 stars lower relative to the restaurant’s average rating to date when they mentioned a female server compared to when they mentioned a male server in the review.

However, awarding evaluators the Elite designation on Yelp closes the gender gap in restaurant ratings by 56.5 per cent leaving a gender gap of 0.05 stars.

This suggests that when evaluators are motivated to maintain their status, they become more equitable in their assessments and become less distracted by factors that are unrelated to candidate quality.

Implementing a status award system to scrutinise managers’ decisions regarding hiring and promotions could be a cost-effective way for organisations to reduce gender bias and remove barriers for women.

However, it’s crucial to ensure that managers value the status award to influence their behaviour.

Importantly, the criteria for maintaining the status award should not be too ambiguous. Too much ambiguity can backfire and lead gatekeepers to avoid interactions with women in the workplace.

So, what lies ahead?

EQUAL FOOTING

Despite progress, women remain significantly underrepresented in top positions.

However, our research suggests that if we remove barriers for women, they can compete with men. To achieve this, we must scrutinise the decisions that are being made by gatekeepers.

If successful, we may see a shift in the identity and perspectives of gatekeepers, making it easier for women to compete on an equal footing with men.

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