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Are female CEOs getting bullied by shareholders?

Study finds female CEOs endure much more ‘shareholder activism’ than male counterparts

Chairs around the edge of a conference table
August 11, 2016

Although women make up half of the nation’s workforce, only 5 percent of Fortune 1000 companies have female chief executives. Now, new research from Arizona State University reports that female CEOs are far more likely to be pressured and second-guessed by shareholders than men occupying the same leadership position.

A recent study from ASU’s W. P. Carey School of Business examined “shareholder activism,” which occurs when shareholders seek to affect a corporation’s behavior by exercising their rights as owners. Though shareholders don’t run a company, there are ways for them to influence the board of directors and top management.

Reported in the paper, “The Glare of the Spotlight: Female Leadership and Shareholder Activism,” Christine Shropshire, associate professor of management at the W. P. Carey School of Business, noticed that a disproportionate amount of shareholder activism was aimed at companies with women in charge. The research examined shareholder proposals at Fortune 1000 companies during the time period 2003 to 2013. And results, Shropshire said, were “depressing.”

Shropshire examined shareholder resolutions in a matched sample of firms expected to differ only by CEO gender — industry, performance, size and so on were nearly identical.

“Controlling for other reasons investors target certain firms, our models show that gender alone explains significant activism specifically toward female CEOs,” Shropshire said. “All else held equal, female CEOs have a 27 percent likelihood of facing activism, while their male counterparts have a near zero predicted likelihood of being targeted.”

One explanation for these discrepancies between male- and female-led firms are activists who perceive female CEO appointment as a threat to their investment, based on gender role and status characteristics theories. According to Shropshire, “female leadership is often stereotyped as interactive, collaborative and engagement-oriented, while male leadership is typically categorized as authoritative and powerful.” Shropshire notes that perhaps one reason women come under fire is because activist investors think they’ll be able to sway or bully them more easily.

According to Shropshire, the gender of the CEO may also provide a signal about a firm.

“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,” Shropshire said. “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.”

Activist shareholders are aware of the market value lost when a firm names a female CEO, making them far more likely to speak up and target their requests accordingly.

But, Shropshire said, it’s not all doom and gloom for women in the C-suite. Female-led firms do receive disproportionate amounts of shareholder activism, but her research shows that they can do something about it with proactive public relations.

“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,” Shropshire said. “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.”

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