Melanie Stern is section editor of Families in Business magazine.
Melanie Stern talks to Nan Langowitz, director of Babson College's Centre for Women's Leadership, and Jocelyn Larkin, lead litigation counsel for the 1.6m plaintiffs of the Wal-Mart sex bias class-action lawsuit, about the rising status of women leading family corporations
How strong is the tradition of passing the family business to the son and not the daughter?
It isn't just a question of an automatic assumption anymore; it is possible to think that your daughter might actually want to take over one day, and to therefore get her involved when she is younger. I see this with women owners too – looking at both their sons and daughters, looking out for who is the most interested, and the best qualified.
There has been a strong notion that women in the past have only become entrepreneurs when a crisis pushed them into it and not from initiative or desire, and that this is the same today. Do you agree?
That isn't what our data in the US shows. The number of family companies looking to the women in the family for leaders has gone up by 37% in the last five years. That is a big difference from the past where it often really was a crisis, like the sudden death of a male family owner leaving the woman with no choice but to take over the firm – the 'hard luck Cinderella' story. Now we see families actively choosing and grooming their daughters to take over.
You recently conducted a study of the representation of female entrepreneurs in the US business press. What did you find?
Our findings actually highlighted the prevalence of these 'Cinderella' cases [from the media perspective] – suggesting that, otherwise, why would a woman want to run a business? This is the popular mythology. One can understand that this is a human element story and easy to tell in a really compelling way, but society is still not entirely comfortable with the idea that a woman will go out and set up or lead her own company because there is something she's interested in, something that gives her an opportunity to create value for herself and the community. The US mindset is very much to talk about your humble beginnings and go on to do or be anything; but we don't yet seriously extend the American dream to the women, notwithstanding marrying into money.
In Babson's 2003 study of women in family businesses, you found that female-led family businesses had a lower rate of family member attrition.
There is something about the way women run their firms that creates better organisational cohesiveness. Not only is family member attrition lower but productivity is higher, pointing to an organisational culture that makes staff want to produce more, and family members stick around. Many women's leadership styles are collaborative.
You found that women-owned family firms rarely look outside the family for a CEO. How does this statistic fit with contemporary corporate governance – and nepotism – issues?
In general we found that family firms predominantly have a family member as CEO. However, male owners are more likely to look to non-family members for CEOs than female owners.
Any best practice on leadership and board roles?
Some companies are touted as best places for women to work in lists compiled by the media. The research body Catalyst studied the relationship between female management and return on equity for Fortune 500 companies, and found a positive correlation; those companies with the highest representation of women in management saw a return on equity 35.1% higher than those with the lowest number of women in management. Total return to shareholders was 34% higher.
This year is a bumper year for high-profile sexual discrimination lawsuits from female leaders in some of the world's biggest corporations, including Wal-Mart. Do these cases have the power to effect change or are they just a tempest in a teacup?
The gender pay gap has improved – not as much as it should have though – and companies definitely do not want to be on the front page of the Wall Street Journal on sex discrimination charges. Many companies now have a chief diversity officer, an inclusion programme or a women's initiative. There are lots of things corporations are doing to make sincere efforts to fix situations. But these are not the most simple of problems because there is a set of social norms against which businesses operate, and the companies do not control the way women and men are socialised – they just inherit them at graduate age and then try to create a collaborative environment.
I think the Wal-Mart suit could have an important effect. Wal-Mart is the size of several small countries but it isn't just a problem of size, it is an issue of how it works with its labour force. The case is a bell-weather opportunity to remind corporations about the appropriate ways to work with their employees and provide opportunities for them. If Wal-Mart loses, the first material impact will be that it will start paying its staff differently, and start providing them with opportunities. This will have a ripple effect throughout the US economy and the global economy due to their size. Companies will be forced to look inward and see how they're complying themselves.
Wal-Mart's chief executive Scott Lee set up an 'office of diversity' around the time the suit was passed to the courts, and said management bonuses, his included, would be reduced as much as 7.5% in the next fiscal year if aims to promote women and minorities were not met.
It takes leadership at the top to make serious changes throughout a company. Changing the accountability system and the compensation systems for management will make them understand by hitting their personal evaluation. It's the only way to achieve real change in a company.