The Origins of the Gender Gap
THE OPTIMAL ALLOCATION OF RESOURCES across agents is critical for economic outcomes, both at the level of the individual firm and of the entire economy. And yet, achieving this has proven elusive. An ongoing debate revolves around the claim that male managers obtain more resources than their female counterparts — a pattern labelled ‘the gender gap’.
Many attempts to narrow the gender gap — ranging from greater disclosure to governance rules — assume that it reflects the personal bias of senior decision-makers, in particular CEOs. However, this premise has been difficult to test because it would entail eliciting CEO preferences and making a reliable connection between resource allocations and subsequent outcomes.
We recently set out to tackle this challenge by studying and comparing two things: the personal backgrounds of CEOs and their allocation of capital budgets to male and female division managers at U.S. conglomerates. In this article we will summarize our key findings.
Portrait of the CEO as a Young Man
Our sample comprised 5,679 individuals: 596 CEOs, 1,819 division managers and 3,264 directors. The CEOs were almost exclusively male (98.5%) and, on average, 56 years old. Nearly 62 per cent of them held graduate degrees, the majority of which were MBAs. The dominant majority also served on the boards of other companies, with the median CEO holding two external board seats.
In comparison with CEOs, division managers were younger and significantly more diverse: The average manager in our sample was 50 years old, and about eight per cent were female. Compared with CEOs, division
