319. After the Glass Ceiling, a Glass Cliff

Only 5 percent of Fortune 500 companies are run by women. Why? Research shows that female executives are more likely to be put in charge of firms that are already in crisis. Are they being set up to fail? (Part 5 of a special series, "The Secret Life of C. E. O.'s.")

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Stephen J. Dubner?

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• 0:46Stephen J. Dubner?

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• 1:30Stephen J. Dubner?

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• 2:17Speaker 01

  We knew we had to retool. Our future was in jeopardy.

• 2:21Speaker 02

  There were 15,000 or 20,000 people who were very upset.

• 2:23Speaker 03

  Maybe it was the water. Jack, we've got $400 million missing. We've never had a company go bankrupt.

• 2:30Speaker 01

  From day one, you are the CEO.

• 2:39Stephen J. Dubner?

  If you look at a certain batch of statistics from a certain angle, you'd think that women in the US are on equal or better footing than men. Women have a lower unemployment rate than men. More women get bachelor's degrees than men. Nearly 40% of MBA graduates are female. And what would you say if I told you that the number of female CEOs in the Fortune 500 recently hit an all-time high? It's cause for celebration, right? But let's look at the actual numbers. Out of those 500 companies, there were, as of early 2018, 27 female CEOs, 5.4%. Why? We're several decades into a revolution that brought hundreds of millions of women

• 3:24Stephen J. Dubner?

  into the global workforce, and 40% of managers are women. So what's keeping more of them from reaching the top? To be sure, it's a complex question with a number of factors, some of which you've surely thought about. But there's one you probably haven't thought about, probably haven't even heard of it. Let's start here. I'm Carol Barnes. I'm a retired tech exec. We've been hearing from Bartz throughout the secret life of a CEO series. For 14 years, she ran the software firm Autodesk. In 2009, Bartz became CEO of Yahoo, which at one point was the world's most popular web destination with a market cap worth of $110 billion. But by 2009, it was faltering. It was losing search business.

• 4:08Stephen J. Dubner?

  It was losing display ad business. It had controversially rejected a huge buyout offer from Microsoft. But Bartz thought she could turn things around. The company was...

• 4:19Speaker 04

  Just beaten to the ground. And I really felt that I could help with that and give us some airtime to get back together.

• 4:28Stephen J. Dubner?

  But that is not what happened. Revenue continued to fall. The Yahoo board with the Microsoft non-deal, still a recent memory, started having second thoughts about Bart's.

• 4:39Speaker 04

  And they got scared and they didn't want to be considered the worst board in the world again. And they thought, well, we know how to do this. We'll just fire Carol.

• 4:51Stephen J. Dubner?

  In retrospect, do you feel that it was to any degree for you a kind of suicide mission?

• 4:57Speaker 04

  Yes, I do now believe that.

• 5:04Stephen J. Dubner?

  Researchers have a name for what happened to Carol Bart's. She got shoved off what's called... The glass cliff. Today on Freakonomics Radio, we examine the evidence for the glass cliff phenomenon.

• 5:17Speaker 05

  We found that white women and people of color are significantly more likely than white men to be promoted CEO to weekly performing firms.

• 5:27Stephen J. Dubner?

  We look at the ramifications.

• 5:29Speaker 06

  More than a third of women CEOs have been targeted by shareholder activists, and that's not true of men.

• 5:34Speaker 07

  Well, it's pretty depressing.

• 5:36Stephen J. Dubner?

  And we look at possible solutions.

• 5:39Speaker 08

  It has to be a societal shift in perceptions of what's acceptable. Oh, gee, what a concept.

• 5:45Speaker 09

  From WNYC Studios, this is Freakonomics Radio, the podcast that explores the hidden side of everything. Here's your host, Stephen Dubner.

• 6:15Stephen J. Dubner?

  In our previous episode, we heard the story of how Ellen Pao became interim CEO of Reddit and then, eight months later, was fired.

• 6:23Speaker 02

  So I did not go in saying, "This is a glass cliff, but if I can do this, then that's going to show how excellent of a leader I am. And if I don't, well, who cares? It was a terrible situation, anyway." I went in thinking I could actually change it.

• 6:41Speaker 02

  I'm not really concerned about people thinking that I was not the best CEO and I hit this glass cliff. I'd much rather call attention to the problem. So if my being portrayed as an example of it is helpful to prevent other people from facing discrimination, then, yeah, then it's a good thing.

• 7:00Stephen J. Dubner?

  Pao was ambivalent about labeling her situation at Reddit a glass cliff, but when I'd asked her about it, she knew exactly what I meant. The research behind the glass cliff effect began in the UK in the early 2000s.

• 7:13Speaker 10

  I got involved in looking at women in leadership as I finished my PhD.

• 7:18Stephen J. Dubner?

  Michelle Ryan is a professor of social and organizational psychology at the University of Exeter.

• 7:24Speaker 10

  And we started being very interested in women's underrepresentation in leadership positions.

• 7:29Stephen J. Dubner?

  Ryan and her colleague Alex Haslam had been struck by something they read, something quite provocative.

• 7:35Speaker 10

  In November 2003, The Times in London printed an article that was looking at how women were performing in the top companies on the London Stock Exchange. And what they were saying is that companies that had more women on their boards of directors tended to be worse in terms of their average annual share price compared to those companies that had less, or indeed, no women. And their conclusion was that women were wreaking havoc on company performance.

• 8:03Stephen J. Dubner?

  The article didn't sit right with Ryan. Just having women on the board of directors hurt a company's performance? When she looked into the data that The Times was citing, she found serious problems with their methodology. Can you believe that, that a newspaper relied on flawed methodology to produce an article with a juicy headline? Shocking, I know. In any case, Ryan and Haslam conducted their own analysis of British companies.

• 8:28Speaker 10

  And instead of looking at how many women were on their boards of directors, we looked at when women were appointed and then also when men were appointed as well. And then we could look at the performance beforehand and afterwards.

• 8:40Stephen J. Dubner?

  So if The Times article was correct?

• 8:43Speaker 10

  If The Times article was correct, we should see that after women were appointed to these boards of directors, share price should go down. But actually, what we found was the opposite. What we found was when companies had been doing poorly, when their share price had been declining, they then appointed women to their boards of directors. So what we found was a really different causal problem. So rather than women wreaking havoc on company performance, what we found was when companies were doing badly, they were much more likely to appoint women. It was a very different narrative from the one that The Times was putting forward, but it also opened up more questions than it actually solved.

• 9:19Stephen J. Dubner?

  Ryan and Haslam called this new narrative "the glass cliff."

• 9:23Speaker 10

  The idea of the glass ceiling is that women can't get beyond a certain point within the leadership hierarchy. They come against a sort of invisible and very subtle barrier that prevents their rise.

• 9:35Stephen J. Dubner?

  The glass ceiling idea was popularized in the 1980s.

• 9:39Speaker 10

  So the metaphor of the glass cliff really is to evoke this idea of women being very high up. So they're very senior, boards of FTSE 100 companies, boards of Fortune 500 companies, senior leadership roles in Parliament, for example. But their positions are precarious because they're happening in difficult times. So the idea is to evoke this idea of women kind of teetering on the edge and that their fall or their failure might be imminent.

• 10:11Stephen J. Dubner?

  Ryan's analysis suggested that women were being set up to fail, whether intentionally or not. Such a failure would reflect poorly not only on the woman in question, but quite possibly on female candidates to follow. Ryan's research did have its limitations. It covered only British companies and only board members, not CEOs. Also, it measured companies' stock prices rather than their actual performance. Still, the paper got a lot of attention in social psychology circles, and it inspired some American researchers to pick up the Glass-Cliff thread.

• 10:44Speaker 05

  Well, it was a novel theory.

• 10:47Stephen J. Dubner?

  That is the Utah State University sociologist Kristi Glass. Seriously, Kristi Glass.

• 10:54Speaker 05

  So I heard about the Glass-Cliff after I had been with my colleague Allison Cook analyzing how large investors react to the appointment of women CEOs. I hadn't seen really good empirical tests of it yet, but you know, the notion that women may be set up to fail was at least provocative enough that I wanted to pursue it and test it empirically.

• 11:22Stephen J. Dubner?

  Glass and Cook assembled a database of all the CEO transitions in the Fortune 500, male and female, over a 15-year period. Then they looked at the financial health of those firms, not just their stock price.

• 11:35Speaker 05

  This is separate from investors making assumptions about where the firm is at in terms of its valuation. These are actual measurable returns to the firm.

• 11:48Stephen J. Dubner?

  For instance, when a firm went looking for a new CEO, what was their return on assets and return on equity looking like? Did Glass and Cook find, as Ryan and Haslam had found, that women are more likely to get the top job when a firm is in trouble? They sure did.

• 12:06Speaker 05

  We found that white women and people of color are significantly more likely than white men to be promoted CEO to weekly performing firms.

• 12:15Stephen J. Dubner?

  Weekly performing firms, which, if the female CEO didn't turn them around, often replaced her with a man.

• 12:22Speaker 05

  We term this the savior effect. In other words, the firm experimented with this kind of non-traditional leader, perhaps trying to signal it was headed in a bold new direction, that it was aggressively going to address performance declines. And if that doesn't happen, these leaders tend to be blamed and replaced, you know, like back to normal, bringing in the kind of white male typical leader to then navigate the firm out of crisis.

• 12:56Stephen J. Dubner?

  Other researchers began looking for evidence of the glass cliff beyond the corporate world. They found it in education, where women were more likely to have leadership positions in failing school districts. They found it in political elections, where women are more likely to run in unwinnable contests, and in political leadership, where women are more often elevated during periods of political instability. So there's plenty of evidence for the glass cliff phenomenon. Back in the UK, Michelle Ryan wanted to know why it happened. Was it necessarily driven by discrimination or some other nefarious instinct? Ryan set up some lab experiments to explore.

• 13:41Speaker 10

  So what we did is we described a number of scenarios where we gave details about a leadership position that needed to be filled, and then a number of candidates who could fill that position. So we have all sorts of different scenarios. So it might be a financial one, but we've also looked at which lawyer do you choose when a case is risky and highly criticized? We asked the average voter on the street who they'd want to run in an unwinnable by-election. And then we asked teenagers to say, who would you like to represent you on the board of a music festival when the festival's doing badly?

• 14:15Stephen J. Dubner?

  Some of the experiments used a clever trick.

• 14:18Speaker 10

  We had two incredibly well qualified candidates for the job. One man and one woman. We gave their CVs and descriptions of their experience. We gave photos of them and we very carefully made sure that they were absolutely equally qualified for the job. And in fact, what we had was we had two CVs and we just switched their names on them, really, for every second participant in the study. And then we said, okay, who do you want? In a scenario where everything is doing well, who do you want? The man or the woman? And in a scenario where things were going badly, who do you want?

• 14:53Stephen J. Dubner?

  And what did they find?

• 14:54Speaker 10

  What we found was when everything is going well, so when share price was going up or when everything is hunky dory, we found they were almost 50/50 likely to choose the man or the woman. But when things were going badly, when there was crisis on the horizon, where there'd been criticism and where there was risk involved in the leadership position, they almost exclusively chose her. So we can conclude from that there's some sort of preference for women when all is going badly.

• 15:24Stephen J. Dubner?

  But Ryan does not interpret this preference as a willful sabotage of the female candidates.

• 15:30Speaker 10

  We've done some follow up studies to really find out what it is about women or what assumptions are people making about women that make them particularly good in times of crisis. And what we found is that there's some evidence that there are stereotypes, gendered stereotypes about men and women, that suggests that women might be better leaders in times of crisis. So if we ask people, what are the sorts of traits and abilities that you want from a leader when things are going badly? The sorts of traits that they come up with are stereotypically feminine traits. So we want someone that's good with people, we want someone that's warm and who's a good communicator, someone that's tactful and sociable.

• 16:12Speaker 10

  Now, I'm not saying that all women have those traits or that no men have those traits either, but those are our stereotypically feminine traits.

• 16:23Stephen J. Dubner?

  If that's the case, the appointment of a female CEO to a troubled company isn't so much a suicide mission as a rescue mission. If you wanted to get Jungian, you might look at this as one big mother complex. That is, when an institution is in trouble, it cries out for mommy to make it all better. But when things are going along OK, dad'll do.

• 16:48Speaker 10

  So when everything is going well, we find that stereotypically masculine traits are more likely to be seen as desirable. So if share price is up or steady, then we're more likely to want leaders who are ambitious and forceful and competitive. So again, these are our stereotypically masculine traits. So this is a finding that's been in the literature since the 1970s, and that's called the Think Manager, Think Male Association. So when everything is going well, we have Think Manager, Think Male. When things are going badly, we have Think Crisis, Think Female.

• 17:22Stephen J. Dubner?

  That's one theory for why women are often appointed to troubled companies. Here's another theory. A typical male CEO candidate can afford to pass up an opportunity at a troubled company, knowing there's likely to be another opportunity soon, which leaves more openings at troubled companies for women. In a case like that, a female CEO is already at a disadvantage to her male counterparts since the company's in rough shape to start. But then, something else can happen, something that could push a female CEO a bit closer to the edge of the glass cliff, as discovered by our next guest. I'm Christy Shropshire. Shropshire, a management professor at Arizona State University,

• 18:05Stephen J. Dubner?

  was wondering whether female CEOs were more likely to be targeted by activist investors, a firm or fund who buys up enough stake in a company to give it leverage to push for a change.

• 18:16Speaker 07

  So we looked at any firm in the S and P 1500 index that appointed a female CEO between 2000 and 2013. Then we looked at the characteristics of those organizations and tried to match as closely as possible a firm that appointed a new male CEO in the same time period.

• 18:33Stephen J. Dubner?

  So similar firms with similar histories of activist investing and similar timing on the appointment of new CEOs, but one group of CEOs were female, the other male. By comparing them, Shropshire was actually correcting for the Glass-Cliff effect. In other words, if the firm with a female CEO was in crisis, it would be matched against a firm with a male CEO that was also in crisis. So, holding everything else constant, what did she find?

• 19:02Speaker 07

  So we found that the gender effect alone is responsible for a 28% increase in the likelihood that a firm experiences targeting from an activist.

• 19:12Stephen J. Dubner?

  What do activist investors want? They might be pushing the CEO to make a big acquisition. Maybe they want a seat or a few seats on the board. Maybe they want a new CEO. In any case, it can be a big distraction. Shropshire cites Irene Rosenfeld, who until late 2017 was CEO of Mondelies, the giant snacks conglomerate that had been spun off from Kraft Foods.

• 19:38Speaker 07

  Irene Rosenfeld estimated that a quarter of her time was spent taking phone calls and having conversations with two activist investors that had targeted her organization. With all of the things that a CEO needs to manage, to spend 25% of her time just conversing with and being responsive to two activists who hold some minor percentage in her organization is pretty mind boggling.

• 20:05Stephen J. Dubner?

  One of those two activists was Nelson Pelts, who's one of the most active activist investors around, or at least one of the most visible.

• 20:13Speaker 07

  Yeah, so he gets a lot of media attention and seems to

• 20:19Speaker 07

  To respond to that positively. You know, he's being more aggressive toward these organizations because he expects it to be not only a big story and something that gains kind of notoriety, but also that he sees the potential to make the biggest difference the fastest, which you can't hold against him. But when you look at the record of targeting behavior, there is a disproportionate number of female CEOs that are targeted and very publicly. Like in the Irene Rosenfeld example, he's spending a lot of time on the phone with her and expecting to be able to gain access to her whenever he would like, get time in her office.

• 20:59Speaker 07

  But it's also this pattern of going after female-led firms with very broad demands and pretty significant demands.

• 21:15Speaker 06

  More than a third of women CEOs have been targeted by shareholder activists, and that's not true of men.

• 21:21Stephen J. Dubner?

  That's Jeff Sonnenfeld of the Yale School of Management. He's a veteran CEO tracker.

• 21:26Speaker 06

  That somehow consciously or unconsciously, even when you finally get the job, you're seen somehow as more vulnerable, easier prey for short-term activists to come after you.

• 21:35Stephen J. Dubner?

  Sonnenfeld brings up Ellen Coleman, former CEO of DuPont.

• 21:39Speaker 06

  Nobody has had better performance than Ellen Coleman did for the six years that she ran DuPont with 260% total shareholder return. And then basically, one bad quarter, the whole board collapses like log furniture on her to Nelson Peltz, and the shareholders are worse off, by the way, in the aftermath.

• 22:03Stephen J. Dubner?

  Peltz also pushed for changes at PepsiCo, the global snacks and soda empire. Here's PepsiCo's CEO, Injunui.

• 22:11Speaker 01

  So when Nelson Peltz came and, believe me, when he presented his white paper to us, we studied every chart, every idea, and had multiple conversations with him because at the end of the day, we viewed him as free consulting, painful, but free consulting.

• 22:26Stephen J. Dubner?

  What was his best idea?

• 22:28Speaker 01

  You know, the way he thought about costs, you know, I wouldn't call it his best idea, but, you know, he came in with a bunch of benchmarks from the outside. So a lot of little operational things that Nelson opened our eyes to.

• 22:45Stephen J. Dubner?

  Pelts wanted PepsiCo to turn itself into an even bigger snacks juggernaut by buying Mondelez, and he wanted PepsiCo to spin off its beverage business. Here's what Newey said at the time. "To be honest, we don't need activists to tell us what to do." Other big investors thought PepsiCo was diluting its market power by focusing too much on nutritional snacks. In other words, we're making a lot of money selling junk food, so why do we want to stop selling so much junk food? But Newey argued that this was ill-advised, short-term thinking. She stood up to the activists, including Pelts. He ultimately exited his position. Perhaps not coincidentally, Newey is still thriving as the CEO of PepsiCo.

• 23:28Stephen J. Dubner?

  Pelts himself has claimed to be, quote, "gender-blind," but his actions toward Newey at PepsiCo, Coleman at DuPont, and Rosenfeld at Mondelez did lead Fortune Magazine to publish a piece headlined, "Corporate Raider Nelson Pelts Simply Can't Resist Women." There's one more phenomenon that seems to work against female CEOs.

• 23:52Speaker 07

  Media coverage disproportionately punishes the female CEOs.

• 23:56Stephen J. Dubner?

  That, again, is management professor Kristy Shropshire.

• 24:00Speaker 07

  So when there is really high levels of CEO-focused media, the firms that have appointed a female CEO see an even greater likelihood of being targeted by activism. It increases 52%.

• 24:17Speaker 11

  The women that get those jobs are not probably getting them in maybe the best of times. Very often, they might be getting them in the worst of times.

• 24:24Stephen J. Dubner?

  David Rubenstein is a founder of the Carlyle Group private equity firm, which over the years has acquired, turned around, and sold off hundreds of companies in all sorts of industries, which means he has worked closely with hundreds of CEOs.

• 24:38Speaker 11

  There are some women CEOs who've done spectacular jobs in the organizations that they have run. So Phoebe Novakovic, for example, has done a terrific job at General Dynamics. Marilyn Houston has done a spectacular job at Lockheed. I think Meg Whitman's done a very good job at Hewlett-Packard. And of course, Inger Newey, I think she's done a spectacular job.

• 24:58Stephen J. Dubner?

  And what about female CEOs who don't do a good job? Rubenstein has seen in practice what Shropshire found in the data.

• 25:06Speaker 11

  Women, when they don't do a good job, probably get more attention than when men don't do a good job. And there are many men who don't do wonderful jobs.

• 25:15Stephen J. Dubner?

  Inger Nui of PepsiCo says that female CEOs draw more attention generally, or at least different attention.

• 25:22Speaker 01

  When you become a CEO and you're a woman, you are looked at differently. You know, whatever you say, people do, they say things like, well, you know, a guy CEO wouldn't have said that. You are held to a different standard. There's no question about it.

• 25:36Stephen J. Dubner?

  We featured a long interview with Nui in an earlier episode in this CEO series. We asked her about PepsiCo research showing that men and women eat chips differently.

• 25:48Speaker 01

  Especially as you watch a lot of the young guys eat the chips, they love their Doritos and you know, they lick their fingers with great glee. And when they reach the bottom of the bag, they pour the little broken pieces into their mouth because they don't want to lose that taste of the flavor and the broken chips in the bottom. You know, women, I think, would love to do the same, but they don't. They don't like to crunch too loudly in public and you know, they don't lick their fingers generously. And they don't like to pour the little broken pieces and the flavor into their mouth.

• 26:24Stephen J. Dubner?

  So is there like a male and female version of chips that you're playing with or no?

• 26:28Speaker 01

  It's not a male and female as much as are there snacks for women that can be designed and packaged differently? And yes, we are looking at it and we're getting ready to launch a bunch of them soon. For women, you know, low crunch, the full taste profile, you know, not have so much of the flavor stick on the fingers. And how can you put it in a purse?

• 26:54Stephen J. Dubner?

  Newey's comments in that interview launched a controversy. It began with a British tabloid that twisted the story into a too-good-to-be-true internet tale, said that PepsiCo was about to start selling, or depending on where you read it, maybe they'd already started selling, something called Lady Doritos. The internet then did what it does best, accusing Newey of sexism and general idiocy. This led PepsiCo to issue a statement, quote, "The reporting on a specific Doritos product for female consumers is inaccurate. We already have Doritos for women. They're called Doritos."

• 27:34Stephen J. Dubner?

  It's impossible to say what role Newey's gender played in this story. For starters, a lot of commenters, without having heard the actual interview, may have assumed the CEO of PepsiCo is a man. After all, they'd have a 94.6% chance of being right. It's also possible a male CEO wouldn't have even dared talk about the difference between how men and women eat chips. Looking beyond the momentary internet spasm, it's worth pointing out that a key argument for having women in leadership has been so that they can do exactly what Injunewee did, which is take into account the perspective of the women who use her company's products. And maybe that's true, but in this case, suggesting that women shouldn't or don't

• 28:17Stephen J. Dubner?

  want to crunch their chips as loudly as men? Well, you get the feeling that the parable of the Lady Doritos will be a business school case study for decades to come.

• 28:33Stephen J. Dubner?

  There's one more obvious question to ask about female CEOs. How do they do versus males? The evidence on this question isn't yet what you'd call definitive, but most of it seems to suggest that female CEOs do as well, if not better, than male CEOs. A 2016 study from the Peterson Institute for International Economics looked at more than 20,000 international firms and found essentially no difference in male and female CEO performance, but they did find that firms with more women among top leadership, including the boards and other C-level positions, were more profitable. So, coming up on Freakonomics Radio, how do the glass cliff and the glass ceiling

• 29:18Stephen J. Dubner?

  affect the economy overall?

• 29:22Speaker 08

  Gender diversity is incredibly important from the productivity standpoint of you.

• 29:26Stephen J. Dubner?

  We'll also hear what exactly happened to Carol Bartz at Yahoo.

• 29:32Speaker 04

  So which bad YouTube video me did you watch?

• 29:36Stephen J. Dubner?

  And if you are enjoying the secret life of a CEO series, or even if you're hating it, let us know. We love feedback. We're on Twitter and Facebook. Our email is [email protected]. You can also comment on the episodes at freakonomics.com, or you can also sign up for our free email newsletter. We will be right back.

• 30:07Stephen J. Dubner?

  Freakonomics Radio is sponsored by Granola. You know that moment when a meeting ends and someone says, let's circle back on this next week, and everyone nods, but no one writes it down? Then next week rolls around and it's radio silence? That's why Granola exists. Granola is an AI-powered notepad built for the way real people actually meet. You take rough notes like you normally would, and in the background, Granola securely transcribes the meeting. Then it turns everything into clean, structured, actually useful notes when the meeting ends. And the best part? Granola works through your device's audio, which means it integrates seamlessly into the video conferencing tools you already use. No setup, no awkward bots. It's just your normal meeting with superpowers. If meetings are eating up your day, Granola is a no-brainer. You can try it totally free.

• 30:51Stephen J. Dubner?

  Just head to granola.ai/freakonomics. That's granola.ai/freakonomics to get your time back. Try it for free at granola.ai/freakonomics.

• 31:10Stephen J. Dubner?

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• 31:41Stephen J. Dubner?

  Freakonomics Radio is sponsored by hotels.com. Hotels.com helps you find and book the right stay for work faster. With business preferences, save your travel must haves like gym access or breakfast just once, then get tailored results whenever you search for work travel. Plus, with a free membership, you can save up to 20% on hotels and earn rewards on every stay for future travel. Book now at hotels.com. Visit hotels.com for details.

• 32:19Stephen J. Dubner?

  What have we learned so far? Female CEOs are much more likely to be hired when a firm is in trouble. Firms that hire women as CEOs are much more likely to be targeted by activist investors, all of which can contribute, as you'd imagine, to a perception that female CEOs are to be avoided, which may help explain why only 5.4% of Fortune 500 companies have one. That low figure is obviously bad news for women in the corporate world. What about for the rest of us and for the economy itself?

• 32:55Speaker 08

  So my name is Olga Shurchkov, and I am an economist at Wellesley College.

• 32:59Stephen J. Dubner?

  Shurchkov studies the relationship between gender and economic outcomes.

• 33:04Speaker 08

  Achieving equality is not just an issue of social justice, but really, it is an economic imperative. There are many studies at the firm level and also at the macro level that suggest that gender diversity in the workplace actually helps firms and economies become more productive over time. So if you aggregate all of that up, then from the macro perspective, underrepresentation of women in high-level management positions is problematic.

• 33:32Stephen J. Dubner?

  There's also the waste of all that human capital. Remember, more women are getting bachelor's degrees than men. Also, remember that firms with more women in the C-suite are more profitable.

• 33:44Speaker 08

  We know that human capital is an important ingredient in productivity. And so, underrepresentation of women is essentially causing there to be less skills and less diverse skills in production. And that's, that's obviously a problem.

• 34:05Stephen J. Dubner?

  So the Glass-Cliff Effect has been demonstrated in a variety of studies and a variety of contexts by different researchers using different measures. And none of these findings come as a surprise to Carol Bartz, former CEO of Autodesk and Yahoo.

• 34:21Speaker 04

  Oh gee, what a concept. Did they pay a lot for that research?

• 34:27Stephen J. Dubner?

  Bartz, we should say, has a reputation for speaking her mind.

• 34:32Speaker 04

  So which bad YouTube video me did you watch?

• 34:35Stephen J. Dubner?

  Her style may come from her upbringing.

• 34:38Speaker 04

  I came from a dairy farm in Wisconsin. My mom died when I was eight, so I was very motivated. All was to do well. And I was ornery.

• 34:48Stephen J. Dubner?

  Bartz studied computer science at the University of Wisconsin and graduated in 1971. It was great timing for someone with a CS degree. She went on to work at Digital Equipment, 3M, and Sun Microsystems.

• 35:04Speaker 04

  Well, I was both fortunate to be a woman and unfortunate. And let me tell you why. First of all, it was easier in the beginning because not many people had computer science degrees. And so they didn't care if you were a orangutan. You could get a job because they didn't understand what was going on and they thought maybe you could help them. So I felt fortunate from that standpoint. Unfortunately, though, at that time, I walked into a mess of typical bad men that you read about today.

• 35:39Stephen J. Dubner?

  You've been in business for a long time and in technology for a long time. How would you compare, you know, the status of female leadership now versus, let's say, 40 years ago?

• 35:52Speaker 04

  40 years ago? I mean, 40 years ago, I was promoted to be the sales manager from the team I was actually working with. And one of the guys came in and said, "I'm just going to tell you that I'm not going to work for any plug-compatible boss." Now, many of you don't know what plug-compatible means, but it means you have one end and another end. And I said, "Fine, but I'm not going anywhere."

• 36:22Speaker 04

  And he made it very, very clear that he was unhappy and was going to just sit there and cross his arms and pout. And I said, George, I don't care what you do, but you got about three days to get your act together or get out of here. You know, I'm not going to go hide in the corner because somebody comes and says, I don't like you.

• 36:42Stephen J. Dubner?

  Whether it was Bart's blunt style or simply her abilities, she won the respect of her colleagues and she kept rising in the industry. In 1992, she became president, chairperson, and CEO of Autodesk, which makes software for engineers and architects.

• 36:58Speaker 06

  She came into this basically a tools business in the software world.

• 37:03Stephen J. Dubner?

  It's Jeff Sonnenfeld again from Yale.

• 37:05Speaker 06

  And she also faced a fairly sexist or gender-infused revolt, some resentment against her by the founding cadre that resented her parachuting in.

• 37:18Stephen J. Dubner?

  Profits had been falling, and yes, there was some friction within management. And then, exactly one day after she started as CEO, Bart's got diagnosed with breast cancer. She had a radical mastectomy and seven months of chemotherapy, but she got through that and she got through to Autodesk's engineers as well. She led the firm through the dot-com boom and bust, growing its annual revenues from $300 million to $1.5 billion.

• 37:50Speaker 06

  If that's where it began and ended, you'd be at admiration of Carol Bart's forever.

• 37:54Stephen J. Dubner?

  But that's not where it ended. Bart stepped down as CEO of Autodesk after 14 years and became its executive chairwoman. But three years later, she was recruited to run Yahoo.

• 38:05Speaker 06

  Media was not her space, and Yahoo was much more of a consumer brand and media business.

• 38:10Stephen J. Dubner?

  There was also the matter of timing.

• 38:14Stephen J. Dubner?

  So you took over as CEO of Yahoo in 2009. The Great Recession was raging. Online ad revenue was plunging. Google had been gobbling up search business. There was a sense that Yahoo's glory days were behind it. Also, you were replacing Jerry Yang as CEO, one of the founders of the company. How did you, at the time, how did you weigh the pros and cons of taking over Yahoo?

• 38:38Speaker 04

  Well, let's kind of take them in order. Great Recession. I have always had this belief that it goes down, then it comes up, and then it goes down and comes up. You just don't know the depth and the frequency and length.

• 38:53Stephen J. Dubner?

  So that wasn't that big a concern for you, per se, the recession?

• 38:56Speaker 04

  No, I felt that it was so bad in '08, in the fall, that it certainly was going to last, but that would give me time to sit under the shadow of the recession to get some things done. And I wouldn't be criticized because, gee, everybody's in recession.

• 39:17Stephen J. Dubner?

  Right, yeah.

• 39:18Speaker 04

  So I viewed that as a positive.

• 39:19Stephen J. Dubner?

  Gotcha. That makes sense, yeah.

• 39:21Speaker 04

  And Jerry actually personally courted me to take this job. I had known Jerry before, and he personally pushed really hard for me to take this job. So I wasn't worried about Jerry as a founder. The third thing was, it just looked like a fun problem. It really did. It just looked like something that would be very, very interesting.

• 39:48Stephen J. Dubner?

  And when you say a fun problem, how would you define "the" problem?

• 39:52Speaker 04

  Well, as you already said, ad revenues were stalled, a lot because of the recession. Yahoo had fallen way behind in search and had really lost its confidence because the Microsoft takeover attempt had just ended when I went in, and the employees were just beaten.

• 40:18Stephen J. Dubner?

  Bart started catching criticism from the outside after her very first conference call with analysts.

• 40:23Speaker 04

  I mean, one of the things that I did, which, you know, later, of course, I can get criticized for anything, but I just tried to stand up for the people because they were so beaten down from this botched Microsoft deal that all the analysts wanted to ask me about is why we didn't do Microsoft. I wasn't even there. And would you have done Microsoft? And I said, let's get back to what we're doing now, not what happened last year, and give the Yahoo people some chance to breathe.

• 40:57Stephen J. Dubner?

  Her actual words were, "Let's give this company some friggin' breathing room." In the business press, she was called combative and sharp.

• 41:06Speaker 04

  And I really went after them. And of course, that started our long love affair.

• 41:12Stephen J. Dubner?

  Right. Now, if you'd gone after them, if your very same words and the very same tone happened to have been attached to a male human, right, how do you think that position, your position of trying to buy that breathing space, would have been received by the analysts?

• 41:28Speaker 04

  Oh, I think it would have been received great. And I'm not, I'm positive. I'm not hiding behind any, "Oh, poor Carol." I'm just saying, they just don't like it.

• 41:48Stephen J. Dubner?

  Media coverage aside, one of the first things Bart's did was restart talks with Microsoft. This led to an agreement in which Yahoo began using Microsoft's new search engine, Bing. While Bing did not officially stand for "but it's not Google," that was a perception, so this was a big boost to Microsoft. In return, Yahoo got favorable commissions on search ads that ran alongside Bing results. Yahoo investors disliked this new deal right out of the gate. They'd been hoping for a cash windfall. But Microsoft did not pay Yahoo a lump sum. Yahoo also lost out on all that user data tied to search. And as we now know, aggregating user data is really where the industry was headed. Yahoo's

• 42:32Stephen J. Dubner?

  profits did rise, but mostly because of all the layoffs Bart's was making, revenues were falling. Yahoo just couldn't sell enough ads, and... There was another problem.

• 42:43Speaker 04

  What I didn't understand correctly was the influence of Alibaba.

• 42:49Stephen J. Dubner?

  Alibaba, if you didn't know, is a massive Chinese e-commerce company. Yahoo, thanks to some fortuitous early investments, owned a big chunk of Alibaba, more than 40%. As Alibaba grew, Yahoo's stake in it accounted for a large share of Yahoo's market value. Bartz, two years into the job, got into a huge fight with Jack Ma, the CEO of Alibaba. She argued that he had diminished Yahoo's investment stake by improperly transferring some assets out of Alibaba.

• 43:22Speaker 04

  Alibaba was just such a big presence hitting us constantly. And that part, I totally missed.

• 43:31Stephen J. Dubner?

  Do you feel that there were signs that you should have anticipated or could have? Or did it really kind of accelerate without proper warning?

• 43:40Speaker 04

  Well, the only way, the only way that could have been solved is Alibaba wanted us to sell the shares back to them for like, less than $10 a share. And, you know, we own 40% of the company. And, I mean, I should have been fired if I'd have done that.

• 43:57Stephen J. Dubner?

  Right, right.

• 43:59Speaker 04

  And I fought so hard against that and fought and fought and fought directly with the Alibaba management team that they were going to get me one way or the other.

• 44:16Stephen J. Dubner?

  Bartz did fight, but her position had been damaged. Investors started calling for new CEO. The Yahoo board defended her, perhaps not very convincingly. Then a few months later, she was fired, quite unceremoniously.

• 44:32Stephen J. Dubner?

  So, a couple of days after you were fired by Yahoo, you told Fortune Magazine that the Yahoo board were, quote, "doofuses" and you said that "these people [bleep] me over." Why, I mean, you're known for being straightforward, but that was a little bit more straightforward than most people were accustomed to.

• 44:53Stephen J. Dubner?

  Why'd you go so, you know, honest or ballistic at that moment?

• 44:58Speaker 04

  Well, I was in a limo, driving into New York City, when I got a call from Roy Bostock, the chairman of the board, and told me I was fired.

• 45:12Speaker 04

  I was literally 20 minutes away from where he was physically located. He didn't have the nerve to see me face to face. I do not believe that that would have happened to a man. He didn't have the nerve. Now, I like to think he didn't have the nerve because he knew I would have probably punched him out, but um.

• 45:36Stephen J. Dubner?

  Uh huh. And was he right?

• 45:38Speaker 04

  Might be right. I don't know.

• 45:40Stephen J. Dubner?

  Now, I understand, I'm curious to know if this is true. I understand that interview reportedly cost you about $10 million for having violated a disparagement clause in your contract. Is that true?

• 45:48Speaker 04

  You mean that one F word was $10 million?

• 45:55Stephen J. Dubner?

  Well, I don't know.

• 45:56Speaker 04

  I don't think so.

• 45:57Stephen J. Dubner?

  No, did you have to pay back anything from the settlement for having disparaged the board, though, publicly?

• 46:02Speaker 04

  Oh, no, all those little men just ran in the corner.

• 46:07Stephen J. Dubner?

  So, if you did have to pay, I gather, it was worth it?

• 46:11Speaker 04

  Always worth it. Stand by what your words are. You know, why should I have sugarcoated that? Say, oh, I have to go spend some time with my family now because, you know, I was working the whole time my daughter was growing up, but now she's out of college, so I really need to spend some time with her.

• 46:29Stephen J. Dubner?

  So, let me ask you this. Some researchers, academic researchers, talk about this glass cliff phenomenon, that women are more likely to become CEOs when a company is in trouble, for whatever reason it's in trouble, whereas men are more likely to become CEOs for stable companies. So, in this research literature, you, Carol Bartz, are sometimes held up as a classic example of being placed on and maybe shoved off of this glass cliff at Yahoo. What do you make of that characterization?

• 46:58Speaker 04

  Well, first of all, I would say Autodesk was in trouble when I took it over and I didn't get shoved off any cliff.

• 47:07Stephen J. Dubner?

  Quite the contrary, yeah.

• 47:08Speaker 04

  Yeah, quite the contrary. But, listen, it is absolutely true that women have a better chance to get a directorship or a senior position if there's trouble, mostly because a lot of times, men don't want the job.

• 47:26Speaker 04

  And so they go for the tier one man on their list and they take a look and say, I wouldn't touch that with anything. And then they get to the tier two man, and by the time they get to the tier two man, some woman has finally popped up in their mind. And she's so happy that she has a chance to have a senior position as a director or a CEO, that she takes it.

• 47:50Stephen J. Dubner?

  Yeah. That even if the circumstances are prima facie suboptimal, yeah?

• 47:54Speaker 04

  Yeah, exactly. And I, I mean, I think it's good that she takes it. I have no problem with that. But it's not that all of a sudden, the boards wake up and say, oh, there should be a female here. They do that sometimes because it's easier to hide behind, well, of course that failed because it was a female. What, what could we have been thinking? But it's still a pretty nefarious way of thinking.

• 48:22Stephen J. Dubner?

  One theory is that boards will pick female leadership when a company's in trouble in order to signal to investors that, hey, we're really, we're really trying something new and different here. Do you think that was part of the equation when Yahoo's board hired you?

• 48:37Speaker 04

  Uh, well, I'd like to think not, but um, probably. I'd like to think that they hired me because they actually thought I was good.

• 48:49Stephen J. Dubner?

  I mean, you're a different case too, in that your track record running Autodesk was pretty remarkable. But do you think that the board saw you as, wow, she is really the person who can turn this around? Or do you think the board saw you more as some kind of combination of, well, let's take the best we can get, considering we're in trouble? Or let's signal to the markets that we really know we've got to make a change?

• 49:13Speaker 04

  Um, listen, I believe if they had found what they consider the perfect male, they would have taken the perfect male. There's no doubt about that. I, I don't believe a female is ever hired as a CEO, especially from the outside, for the reasons that she was the absolute number one pick.

• 49:38Stephen J. Dubner?

  That's depressing, isn't it?

• 49:40Speaker 04

  Well, of course it's depressing.

• 49:52Stephen J. Dubner?

  From all the evidence we've heard today and the personal testimony, it would seem the Glass Cliff is a significant problem with significant ramifications. So what's to be done about it? How can more good female executives attain the leadership roles they deserve and not just at companies that are in crisis mode? Carol Bartsch thinks it's a pipeline problem.

• 50:16Speaker 04

  The pipeline, we're stuck. We've been spending this whole time talking about CEOs. Let's talk about why we can't get senior vice presidents. And that's the problem. I mean, they're not likely to be picked over into a different company as a CEO if they're sitting as a vice president in one company. And they're not likely to even get to be vice president of that company. So we're really stuck.

• 50:44Speaker 01

  We get a lot of women in, in the entry level positions.

• 50:47Stephen J. Dubner?

  That, again, is Indra Newy, the CEO of PepsiCo.

• 50:50Speaker 01

  You know, as you get to middle management, you know, women rise to those positions and then that's the childbearing years. And when they have children, you know, it's difficult to balance having children, your career, your marriage, and, you know, be a high potential outperformer who's going to grow in the company in an organization that's, you know, every one of them is a pyramid. So it starts to thin out as you move up. We have to solve for that. How are we going to attract women to the workforce where we need them, but allow them to balance having a family and taking care of aging parents and still allow them to contribute productively to the workforce? Don't have an answer to that. It's going to be a concerted effort on the part of governments,

• 51:34Speaker 01

  societies, families, companies, all of us coming together.

• 51:41Speaker 10

  I think what's really important is that stereotypes are incredibly enduring.

• 51:45Stephen J. Dubner?

  That's Michelle Ryan, the academic who kicked off the Glass Cliff Research.

• 51:49Speaker 10

  More recent work very much demonstrates that our gender stereotypes are not actually attenuating. If anything, they're getting stronger. So with this new generation, the millennials coming through, and even the generation coming up behind them, actually, they're more likely to endorse gender stereotypes than, say, myself as a Generation X or, you know, my parents, the Baby Boomers. If anything, they're becoming more traditional.

• 52:20Speaker 08

  I guess the solutions to this are interesting.

• 52:23Stephen J. Dubner?

  And that is the economist Olga Shurchkov.

• 52:25Speaker 08

  Some countries, like the Scandinavian countries, for example, they've actually instituted quotas for a certain ratio of women represented on boards of companies, for example. You know, and it's interesting because when you look at the effects of these policies, we find that, at least in the short term, forcing women into these leadership roles does actually backfire a little bit because it's hard to find enough experienced women at that level to fill those positions. And then, once you start to fill the positions with women who are less experienced, those companies actually suffer in the short term in terms of revenues and profits. So I wish I had an easy answer to this.

• 53:10Speaker 08

  Policies should really be geared towards making it easier for women to actually gain experience, rise through the ranks of companies, you know, without so much interruption to their careers. It has to be a societal shift in perceptions of what's acceptable and what's going to be productive for the long run.

• 53:30Speaker 04

  I mean, we have made no progress.

• 53:32Stephen J. Dubner?

  Carol Bartz again.

• 53:34Speaker 04

  We have made absolutely no progress.

• 53:36Stephen J. Dubner?

  And why do you think that is?

• 53:38Speaker 04

  Because old white men rule. I mean, I had this interesting idea that I was so hopeful.

• 53:49Speaker 04

  That my daughter would go to college and be with open-minded young men. They'd all work together in school. And when they got out, they all realized that they were equally smart. And, you know, off we'd go and things would change. It's exactly the opposite. They got out, the guys got these jobs, they got a little money, and they turned into old frat boys in business as opposed to schools. But, I mean, I really want you to understand, the young men are groomed by the older men to run the thing.

• 54:34Speaker 04

  And they're not predisposed to treat a female any more than a female, not a business partner.

• 54:48Stephen J. Dubner?

  Maybe, at least in the long run, Carol Barts will be wrong. It's impossible to say. All we can tell from her story is that it didn't end well, and she's pretty sure that being female had something to do with it.

• 55:05Stephen J. Dubner?

  That said, every CEO will someday reach the end of their story. If you're lucky, you leave on your own terms. If you're not lucky, well, we've been hearing about that.

• 55:17Speaker 04

  Well, we know how to do this. We'll just fire Carol.

• 55:21Stephen J. Dubner?

  So, coming up next time on Freakonomics Radio, the final episode in our Secret Life of a CEO series, Letting Go of the Corner Office.

• 55:29Speaker 01

  The day you become CEO, you have to think about grooming a successor.

• 55:32Speaker 11

  The reason I left was not that I was tired. I concluded that with respect to golf, that it was too frustrating and too humiliating. I am going to have a quesadilla.

• 55:43Stephen J. Dubner?

  Letting Go. It's next time on Freakonomics Radio.

• 55:48Stephen J. Dubner?

  Freakonomics Radio is produced by WNYC Studios and Dubner Productions. This episode was produced by Matt Fraschica with help from Max Miller. Our staff also includes Alison Hockenberry, Greg Rosalsky, Stephanie Tam, Merritt Jacob, Vera Carruthers, Harry Huggins, and Brian Gutierrez. For this series, the sound design is by David Herman with help from Dan DeZula. And special thanks this week to Utah Public Radio. The music you hear throughout our episodes was composed by Luis Guerra. You can subscribe to Freakonomics Radio on Apple Podcasts or wherever you get your podcasts. You should also check out our archive at Freakonomics.com where you can stream or download every episode we've ever made. You can also read the transcripts and find links to the underlying research.

• 56:31Stephen J. Dubner?

  We can also be found on Twitter and Facebook or via email at [email protected]. Thanks for listening.

• 56:48Stephen J. Dubner?

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• 57:18Stephen J. Dubner?

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• 57:51Stephen J. Dubner?

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• 58:28Speaker 12

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