Women on Boards in Finance and STEM Industries

Our forthcoming article in the American Economic Review (May Issue), Women on boards in Finance and STEM industries, is the first in a series of papers in which we connect two policy debates that are usually conducted separately: the debate about women’s underrepresentation in STEM fields and the debate about women’s underrepresentation on corporate boards (see also Adams and Kirchmaier, 2016). Using a comprehensive sample of board data for listed firms in 20 countries from 2001 to 2010, we show that the fraction of women on the board (Board Diversity) is lower for firms in the STEM and Finance sectors (STEM&F) than in non-STEM sectors. This finding is robust to controlling for firm and country characteristics and country and year fixed effects. On average STEM&F firms have 1.8% fewer women on boards than non-STEM firms. Relative to the sample mean of 7.56%, this represents an economically significant leadership gap in STEM&F fields.

Figure 1 provides a striking illustration of our findings. The figure shows the average fraction of women on boards over time stratified by STEM&F and non-STEM sectors. Because the US is overrepresented in the sample in terms of number of firms, we plot the data for non-US countries and the US separately.

Figure 1. Average Percentage of Women on the Board in STEM&F and other Sectors

Note: Figure 1 shows the average percentage of women on the board of more than 8,000 listed firms in 20 countries from 2001-2010. The averages are stratified by STEM&F (solid line) and other sectors (dashed line). STEM&F sectors are the top 5 out of 10 super sectors ranked according to the percentage of employees who are in STEM occupations.

Both panels of Figure 1 show that women are less represented on the boards of firms in STEM&F sectors than in other firms. The difference between non-STEM and STEM&F firms is greater in the US although the average fraction of female directors is higher for both types of firms in the US. The figure also shows that the gap between non-STEM and STEM&F firms does not seem to be narrowing over time.

Relative to their share in the population women are less likely to have a science or engineering degree and are less likely to be employed as scientists or engineers (CEOSE, 2013). To our knowledge, we provide the first evidence that the underrepresentation of women in STEM occupations persists at higher levels of the corporate hierarchy. Similar to findings for academic positions (e.g., Shen, 2013), our findings suggest that there may be biases or impediments to work-life balance that make it harder for women to achieve leadership positions in STEM&F sectors. This means that to solve the underrepresentation problem in STEM&F occupations, it may not be enough to simply encourage entry of women into these fields. More must be done to ensure they do not have reasons to exit the industry.

Recognizing that women’s under-representation on boards varies by sector is also important for the policy movement that aims to increase corporate board diversity. The EU recently approved a draft law that sets an objective of 40% female non-executive directors on boards of listed companies across the 28 member states of the EU (European Commission, 2012). Our results suggest that it will be more difficult for firms in STEM&F sectors to achieve these objectives. It is also plausible that diversity will have a greater impact (positive or negative) on firms in the STEM&F sectors than in other sectors. More generally, given that the underrepresentation of women on boards in STEM&F firms is likely due to the persistent underrepresentation of women in STEM&F fields, it is unlikely that board diversity targets can solve the problems leading to women’s under-representation on boards in these sectors. Policy makers interested in increasing board diversity may need to join forces with those who worry about the retention of women in STEM fields.

The complete article is available for download here.