Firm divisionalization and the gender gap in CEO promotion

Abstract Research Summary This study examines how divisionalized firm structures shape the gender gap in internal chief executive officer (CEO) promotion. We argue that divisionalized firms may narrow the gender gap in CEO succession by generating more individually attributable performance information about senior managers. In contrast to firms in which candidates' contributions are difficult to isolate, divisionalized firms create profit‐and‐loss (P&L) accountability that makes managerial performance more visible and comparable. Using longitudinal data on over 616,000 managers in 49,135 US firms, we find that women are more likely to be promoted to CEO in divisionalized firms. We also find that the gender gap is smaller among managers with prior P&L‐accountable experience. Among managers in divisionalized firms, stronger unit performance relative to within‐firm peers is more positively associated with promotion to CEO for women than for men. The results highlight organizational structure as a potential source of variation in gender inequality in executive advancement. Managerial Summary Why do so few women become CEOs? Part of the answer lies in how firms are organized. When a company is structured into divisions with their own profit‐and‐loss responsibility, the results of the managers who lead those units are easier to observe, compare, and credit to the individual. This leaves less room for subjective judgments through which gender bias often enters promotion decisions. In data on more than 600,000 managers at roughly 49,000 US firms, we find that women are more likely to be promoted to CEO in divisionalized firms. The pattern is strongest for women who have led a business unit, and strong unit results count for more in women's promotion prospects. For boards seeking greater gender equity in CEO succession, structures and evaluation systems that give senior leaders clear, comparable performance records may matter as much as diversity initiatives.