Ground-breaking research has revealed that the gender equity gap in US companies is even worse than the gender pay gap.

In the study, investment collective #Angels [1] – made of six female executives who are all senior figures in other organisations, mainly in the tech sector – delved through a batch of anonymised data held by Carta: a provider of software designed to help manage equity and ownership arrangements. Their mission: to drill down into variations in the so-called ‘cap table’, a standard business document that typically sets out a firm’s ownership structure.

After trawling through data on 180,000 employees and 15,000 founders across more than 6,000 companies – comprising almost $45 billion in equity value – the #Angels made some alarming discoveries. As a Carta blog notes, [2] the study found that, in the employees’ league, women make up 35% of equity holders, but hold just 20% of employee equity. Plus, female equity-holding staff own just 47 cents for every dollar their male colleagues own.

The founders’ segment proved even more concerning, with women forming 13% of the group overall, but holding just 6% of founder equity. Indeed, for every dollar of equity that male founders own, their female counterparts own just 39 cents.

On a big-picture level, it emerged that female shareholders hold $2.2 billion in equity value, while men hold $8.8 billion. In their own blog on the research, [3] the #Angels highlighted a number of factors that are contributing to this picture, such as:

•    Investor bias Investors treat female founders differently, from biased responses to their pitches to skewed perceptions of their capabilities;

•    Underrepresentation Women are vastly underrepresented in venture capital, and

•    Negotiation Women face gender-based challenges in negotiations, which may impact the valuations they achieve, the ownership they retain (paving the way for dilution), and total capital raised.

What can leaders do to turn these trends around?

The Institute of Leadership & Management's head of research, policy and standards Kate Cooper says: “A gender pay gap exists because men are disproportionately represented at senior levels in organisations. Therefore, their benefits packages will be far more likely to include equity shares. We know how unconscious bias affects the decisions people make when it comes to recruiting. As the Equality and Human Rights Commission points out, even if male and female candidates for the same role undertake a maths test, men are typically still disproportionately favoured over women.”

Cooper points out: “in parallel with that, one of the myths of leadership is that it’s rooted in individual characteristics that certain people possess – for example, of decisiveness, courage and risk-taking – and that myth also feeds discriminatory approaches to recruitment. But the more women get promoted in organisations, and the more they’re taken seriously as senior members of the team, the more likely they are to be awarded equity stakes in organisations. So it’s about effective talent pipelining and ensuring progression. It’s about building awareness of how flawed some of our decision making is – not just in the realm of venture capital, but in that of the broader recruitment process across the piece.”

Despite all this, Cooper notes, there are reasons to be optimistic.

“The required publication of gender pay gap data has ushered in a real sea-change, here,” she says, “as has research on why some companies are still lagging behind amid the effort to encourage FTSE 350 firms to appoint more women to their boards. Particularly in light of the spurious excuses that have emerged to account for the latter issue [Ed’s note: for more on those cringe-worthy excuses, listen to the Institute’s podcast from 1 June]. There has been no persuasive rationale from any firm to explain why those problems persist – certainly nothing that fits with a 21st Century paradigm, in which we talk so frequently of leadership-related skills gaps.”

Cooper adds: “what leaders need to do is recognise that something can be done – and one effective way to do this is to make diversity and inclusivity part of a senior figure’s objectives, and ensure that they’re held accountable when teams are not diverse. As for the point on negotiations that the #Angels’ research flagged up, I am also inclined to file that under the myths of leadership: the whole notion that women should be blamed for their lack of advancement. It’s not a female problem – it’s a male-and-female problem.”

For further thoughts on appreciating diversity, check out these learning resources from the Institute

Source refs: [1] [2] [3]

 

Like what you've read? Membership gives you more. Become a member