Why Are There So Few Female Top Executives in Egalitarian Welfare States?

Article excerpt

During the twentieth century, dramatic changes occurred in the economic situation of women across developed economics in the West. Only two or three generations ago, most women were restricted to low-paying occupations with bleak career prospects. In recent years, the women's share in higher-paying professions previously dominated by men has risen substantially. Today, women's labor-force participation is comparable to men's; women have the same or higher levels of education and have largely bridged the pay gap for comparable work. In a parallel development, women's share in positions of power in the political sphere has increased dramatically.

In contrast to these developments, female representation in some key sectors of the labor market has hardly changed in the past century. One particularly conspicuous area is top management of large firms. Female chief executive officers (CEOs) constitute, for instance, only 2.4 percent of all CEOs of the Fortune 500 (F500) companies in the United States and only 1 percent of all listed companies in Sweden (Renstig 2006; Catalyst 2007b). Why have women made broad and consistent advances into top positions in politics and the public sector, but not in this sector? Given the symbolic (and real) importance of CEOs and their top management teams as occupants of a commanding height, many observers have interpreted the lack of female representation as a sign that women still suffer widespread discrimination in society (see, for example, Altonji and Blank 1999; Goldin and Rouse 2000; Black and Strahan 2001). Adding to this puzzle is another and, on the surface, surprising pattern: the fact (as we show) that female underrepresentation among managers is greater in Scandinavian countries, where gender equality has been promoted most heavily, than in Anglo-Saxon societies with their more laissez-faire attitude toward this issue (Hakim 2000, 2004; Mandel and Semyonov 2006).

What accounts for this difference? We examine whether differences in policies and institutions across countries can further our understanding of the patterns of differences, in particular the low share of women in top corporate positions. While considering institutional and policy differences, we also suggest a somewhat novel mechanism to explain the phenomenon--namely, psychologically induced path dependence in career trajectories. Incentive structures include both a monetary and a nonmonetary element and are influenced by norms and habits. We emphasize further that norms and habits are not set in stone and tend to be endogenous--that is, the consequences of policies and institutions (see, for example, Lindbeck, Nyberg, and Weibull 1999). We consider preferences and internal payoff structures as mutable and as affected by factors such as time allocation and the external payoff structure (Bowles 1998).

Our purpose here is thus twofold: (1) to identify pertinent institutions governing the structure of payoffs with regard to women's career choices and aspirations; and (2) to study the interaction and feedback of payoffs with the formation of norms and institutions--formal and informal--and to consider issues such as the path dependence of career progression. This inquiry involves an exploration of psychological mechanisms that may amplify these effects in a setting where preferences are treated as malleable and endogenous. We focus on data for Sweden and the United States, both because of the availability of data and because these two countries constitute the strongest contrasts in the exercise. They stand at opposite ends of the policy spectrum with regard to the degree of state involvement in the economy (Freeman, Topel, and Swedenborg 1997) and in the family (Mandel and Semyonov 2006).

Few studies examine the effects of path dependence on career progression. Shoba Arun, Thankom Arun, and Vani Borooah (2004) investigate how different kinds of career breaks affect women's subsequent working life. …