Several of Silicon Valley’s biggest companies have released a series of diversity reports revealing how few women hold their companies’ top jobs — or jobs in general. Now a recent string of lawsuits is suggesting that the fix isn’t simply to recruit more women — what about the women who are already employed? Are they being held back from rising up?
That’s the key question in investing partner-turned-Reddit CEO Ellen Pao’s ongoing lawsuit against her former employer, Kleiner Perkins, a highly-established venture capital firm based in Menlo Park, California. The jury in Pao’s case began hearing closing arguments this week, and will soon decide whether it was gender bias that prevented Pao from being promoted to a higher-ranking partner, or, as Kleiner Perkins’ lawyer argued, whether Pao is simply “[blaming] others for her own failures.”
A gender gap in the workplace, particularly in Silicon Valley, is old news. But Kleiner Perkins isn’t the kind of Silicon Valley company we’re used to hearing about. By suing a venture capital firm, Pao raises a important point — the gender gap could be a problem at the firms that are often funding Valley companies, too. (In addressing this claim, Kleiner Perkins said in a trial brief last month it has “long been a supporter of women entrepreneurs.”)
According to a report by Babson College in 2013, gender bias reveals itself in the patterns of venture capital investments. (The study was sponsored by Ernst & Young and the Diana Project, both of which prioritize workforce diversity.) Upon analyzing these patterns, the study found that businesses with all-male leadership teams are four times as likely to receive venture capital funding as teams with even one woman.
That apparent gender bias might explain why only 3% of venture-funded businesses are led by women, according to Babson College’s report, which surveyed 6,517 of these businesses. About one-third of all U.S. businesses are led by women, according to the U.S. Small Business Administration:
Curiously, the percentage of female venture capital investors (11%) is almost equal to the percentage of female executives among Silicon Valley’s Top 150 companies (10.8%) — though this is merely a correlation. (These data points come respectively from the latest Venture Census and a 2014 report by Fenwick & West LLP, a global law firm with clients including Facebook and Google.)
Even if these two gender gaps are wholly unrelated, it’s still worth noting that Silicon Valley appears to have an especially pronounced gender diversity problem when compared to the S&P 100. The S&P 100 is a non-industry specific stock index comprised of companies with the 100 leading U.S. stocks, many of which are outside Silicon Valley:
So it’s an undeniable truth that Silicon Valley has a gender diversity problem. But the question of whether the gap has started to close is a bit trickier.
Take, for example, the following chart from Fenwick’s report. It shows the percentage of women in the highest-ranking positions in Valley’s top 150 companies (“SV 150”) between 1996 and 2014. By looking at the upward trends, you could say that gender diversity in Silicon Valley has improved:
But don’t jump to any conclusions. Once again, when you compare the SV 150 to the S&P 100 benchmark, gender diversity in the Valley appears to be problematic. Take a look at the following chart, which shows the top Valley companies had lower percentages of women than the S&P 100 in every single leadership position except President/COO and General Counsel in 2014:
There’s yet another caveat: If you examine only the very top Valley companies, the gender diversity problem is cast in a much better light. After all, Google just named a female CFO this week, while Facebook COO Sheryl Sandberg, Yahoo CEO Marissa Mayer and Hewlett-Packard CEO Meg Whitman are proof of change among tech titans.
The chart below shows gender diversity in the Valley’s top 15 companies (“SV15”), like Google and HP, has rapidly improved. Female representation was remarkably strong in a several positions in 2014, including President/COO and CFO. But other positions, like Chair, were still entirely male in 2014 — just like in 1996:
These mixed messages regarding the depth of Silicon Valley’s gender problem are surfacing on both sides of Pao’s trial. Kleiner Perkins’ lawyers, for example, argued that 20% of its partners are women. That’s much higher than the average of 6%, according to Babson College’s report, which surveyed 139 venture capital firms’ partners in 2013. Kleiner Perkins’ top ranking female partner, Mary Meeker, even testified against Pao, arguing the company promoted women based on their merits.
But Pao, too, had an arsenal of numbers at the ready. In addition to qualitative evidence of gender bias — like claims of all-male dinner parties — Pao’s legal team also cited the superior performance of investments made by the company’s female investors, including Pao. A female partner at Kleiner Perkins once reportedly even constructed a matrix comparing women’s and men’s investments to drive this point home.
The jury in Pao’s trial will soon put an end to these arguments — but the gender gap debate will surely continue outside the courtroom. Even if the jury sides with Kleiner Perkins, Pao’s closely watched trial remains a warning for the larger, male-dominated business industry to reevaluate the treatment of women in their companies. There’s a business incentive at play here, too: Companies with female leaders appear to be performing unusually well, according to a recent study of women-led companies by Karen Rubin, director of product management at the algorithm development site Quantopian. In her study, Rubin showed how the women-led Fortune 1000 companies — there are only 27 currently — posted greater cumulative returns than those of SPY, a tracker of the S&P 500 stock index, which Rubin used as a benchmark:
In fact, it seems that these female-run companies have outperformed the male-dominated benchmark even more often since the financial crisis of 2008-09. That’s a gender gap to be proud of — and one that can’t be ignored.