Research Shows Gender Differences in Use of Social Networks by Top Executives

Marie Lalanne and Paul Seabright of the Toulouse School of Economics published in October results of their study to find answers to the questions: why do women executives earn less, and will having quotas to get women on boards make a difference?

The studied opens with an attention grabbing fact: Using a dataset describing the career history of some 16,000 senior executives and members of non-executive boards of US, UK, French and German companies, women – who make up 8.8% of the sample – earned average salaries of $168.000 in 2008, only 70% of the average $241.000 earned by men.

The researchers approached their quest from the perspective of networks – a line of inquiry so far underutilized in management studies.

They found that the more executives a male executive knows, the higher his salary.  For women, there is no correlation between the number of executives they know and their remuneration.

Elite network structure

A person who sits on a company board may sit on several other boards and may be an executive on one (or several) of the corresponding firms (or may have once been an executive there). Each such individual typically also has personal connections to board members in other companies. Recruitment to board positions often takes place through an informal process, typically involving the role of both professional headhunters and word of mouth recommendations. The pioneering work of Granovetter has highlighted the importance of social connections in obtaining both jobs and ob-related advantages. Recruitment to board-level positions seems particularly likely to give value to such informal connections. According to Granovetter, the social connections that are the most valuable when looking for a job are not the closest ones but the more distant ones. Strong ties, such as close friends and relatives, are more likely to have similar information concerning job opportunities while weak ties, such as acquaintances and coworkers, are more likely to move in different social circles and to have access to different information about job and other opportunities.

Gender differences in social networks

In the workplace, women’s connections seem to be built in order to respond strategically to the different constraints they face, such as a legitimacy problem, or their under-representation in top positions. There is also evidence that preferences play a role, such as the preference for interacting with people of the same sex. It seems that this will compound the effect of female under-representation, leading women’s networks to differ from males’ networks.

Broadly speaking, the men in the sample do not have more links than women, but they manage to leverage the opportunities they do have into higher remuneration while women do not. This is only the case for executive positions.

Executives and non-executive directors are two very different populations among the senior employees of a company; they have very different roles within the company and also very different salaries. Non-executives typically work part-time and may often hold several directorships simultaneously. There is a substantial population – over 50% - of individuals who hold only non-executive positions. They have much lower salaries on average than executives, and many more of them are women.

Two phenomena might explain the executive gender earning gap, the researchers say. First, there is suggestive evidence that women may tend to rely relatively more on small social networks of strong relationship, while men tend to build larger groups with weaker types of relationship. Second, women possibly have more strong than weak links – and the weak links, as Granovetter showed, give access to job opportunities.

Men’s networks are more likely to exclude women in respect of recruitment to positions of real power in the firm (there may even be a deliberate “window-dressing” policy on the part of some firms to appoint women to non-executives positions as a substitute for appointing them to executive jobs). If so this suggests that quota policies that fail to distinguish between executive and non-executive positions may have little effect on the distribution of real power within firms.

To read the full study,  the pdf is available at http://idei.fr/doc/wp/2011/gend_diff_top_executives.pdf