The gender gap in American C-suites has always made it difficult for women to reach the top spot in their firm, but new research suggests that they continue to face discrimination from shareholders even after they’ve taken the helm.
A recent study from the W. P. Carey School of Business at Arizona State University has determined that gender plays the biggest role when predicting whether a CEO will be the subject of shareholder activism.
Christine Shropshire, an associate professor of management at Arizona State, examined shareholder proposals at Fortune 1000 companies between 2003 and 2013. In her study she found that the rate of shareholder activism—a term given when shareholders try to take control of a company from the CEO—remained consistent across industries, company sizes, and levels of performance.
"Controlling for other reasons investors target certain firms, our models show that gender alone explains significant activism specifically toward female CEOs," Shropshire said in a statement. "All else held equal, female CEOs have a 27% likelihood of facing activism, while their male counterparts have a near zero predicted likelihood of being targeted," she said.
Only 5.1% of Fortune 1000 and 4% of Standard and Poor’s 500 companies are led by female CEOs, and women represent just 3% of new CEOs in the United States. Research indicates that women are also more likely to be forced out of their own companies as opposed to leaving after a planned succession or merger, with 38% getting the boot compared with 27% of men.
Shropshire theorizes that female CEOs are subjected to more shareholder activism than their male counterparts because they are perceived as weaker, and thus easier to push around.
"There have been several previous studies that find a negative market reaction to the appointment of a female CEO. At the time the female CEO is announced, the stock price drops," wrote Shropshire. "Those effects aren’t just to the firm that is announcing its female CEO. There are negative spill-over market effects for other female-led firms at the same time."
These market effects are paradoxical, however, given that research has demonstrated how companies with women in the C-suite deliver 34% greater returns to shareholders. And while they only represent 5% of Fortune 1000 companies, female CEOs generate 7% of the list’s total revenue.
There is another major advantage female CEOs bring to their shareholders, and while less tangible and quantifiable, Shropshire specifically noted its importance in her study.
"Historically, female CEOs garner far more media attention than their male counterparts and not for corporate performance and policy decisions alone," Shropshire writes in her paper. "For example, as Silicon Valley’s most prominent woman in a male-dominated profession, Yahoo CEO Marissa Mayer’s appearance, pregnancy and parenting are frequently discussed—yet these topics rarely surface for male CEOs."
But while gender labeling in press materials leads to more coverage, it also increases the likelihood of that female CEO facing shareholder activism by another 31%. The persistent mention of a female CEO's name in media coverage, the study found, leads to a more than 96% probability that her company will be targeted by activism.
As Shropshire pointed out:
"Especially with new CEOs, investors face asymmetric information and challenges in how to evaluate them, and that makes shareholder activists more likely to respond based on stereotypes and status threats. Press releases, analyst ratings, and media coverage fill in those information gaps. If mindful of the language they use, firm communications can help offset the increased activism we find at the female-led firms."