Are Women CEOs Doing Better Running A Business?

Women CEOs Fortune 500 or Women CEOs in India Work place Analysis

When looking to invest in a company, you can look at a countless number of indicators that might predict good financial results.

There are sales figures and profits, the quality of product lines, and even the skill set of the company’s workforce. But there’s one key component that some might overlook: the gender of those in charge.

According to a number of studies in recent years, there is increasing evidence that women in executive positions and on corporate boards can have a positive impact on a company’s performance. A more diverse C-suite, these studies conclude, is connected to higher margins, bigger profits, and better total return to shareholders.

“We find clear evidence that companies with a higher proportion of women in decision-making roles continue to generate higher returns on equity while running more conservative balance sheets,” according to a 2016 report from Credit Suisse. “In fact, where women account for the majority in the top management, the businesses show superior sales growth, high cash flow returns on investments, and lower leverage.”

Numerous studies show that women-led companies tend to perform better than those led by men. Even Kevin O’ Leary of Shark Tank fame admits preferring to invest in companies helmed by women because they produce superior returns. Out of more than 40 companies he invested in, about 95% of the women-led companies met their financial targets, compared with just 65% for businesses with male leaders. Not only that, but research conducted by The Harris Poll shows that half of Americans want to work for a female leader. Now, a new survey reveals that women-led organizations are also more likely to have engaged, inspired and satisfied employees than male-led firms. It turns out that companies led by women aren't just good for business; they are also good for employees.

Greater performance

Several research studies indicate that women-led companies outperform those led by men. One fascinating analysis found that women CEOs in the Fortune 1000 drove three times the returns as S&P 500 enterprises run predominantly by men! Another study by one of the biggest banks in Europe, Nordea, showed that companies with a woman in the chief executive or chairman role performed far better than a major global index over an eight-year period. Credit Suisse also unveiled a research report showing that companies with more female executives in decision-making positions continue to generate stronger market returns and superior profits. In short, the link between gender diversity and better results is undeniable.

More desirable

Fifty percent of Americans say they’d prefer to work at a female-led company over a male-led company because they're more purpose-driven, more likely to have access to childcare, and are more likely to offer equal pay, according to a study conducted by Berlin Cameron, The Harris Poll and The Female Quotient. Millennials in particular place a high demand on work culture. They want to work at organizations that champion values like compassion, collaboration, and the freedom to be yourself. The study also found that 71% of both men and women feel that having a female in an executive position makes them believe that they can also achieve a leadership role. Shelley Zalis, CEO of The Female Quotient, said, “The rules were written more than 100 years ago for and by men, and are no longer working in today's modern workplace. This research shows that more than half of Americans prefer to work with female-led companies, illustrating that leadership norms are changing to help create cultures of care."

Increased engagement

Peakon, a real-time HR insights platform, works with hundreds of organizations around the world to collect employee feedback and analyse the results to help them improve employee engagement. While constantly surveying the global workforce across 40 key categories, Peakon recently isolated five of the areas in which women-led companies are clearly thriving relative to male-led companies: strategy, mission, belief, communication and autonomy. An anonymized subset of data spanning almost 60,000 employees under 3,000 managers was analysed. Forty-three countries are represented in the data, with most of the respondents from the U.S. and U.K.

Employees at women-led companies are more positive relating to their organization's corporate strategy and mission, and its ability to communicate on these topics when compared to male-led companies.

Women-led companies seem to be better at inspiring belief in their products or services, leading to more overall employee engagement, when compared to male-led companies.

Employees at women-led companies seem to enjoy more autonomy and are specifically more satisfied with work-from-home policies when compared to male-led companies.

Why does gender diversity in the C-suite seem to make a difference in a company’s performance? The causation is not entirely clear, though most studies agree that introducing new voices into management roles can bring a fresh perspective and that women executives have access to different pipelines of qualified employees. The studies also note that because women often have a harder path to management roles, those that do arrive there are among the most talented.

Nordea speculated that companies who are already doing well may be more willing to hire a female executive, while struggling companies may prefer to make the “safer” choice and hire a man. But, Nordea said, “It could also be that women are better managers. Women may also be more careful in their projections than men so that when they actually deliver on what they promise, it has a positive effect on the share price.”

Obviously, the gender of executives in the C-suite and boardroom should not be the only factor to consider when looking to invest in a company. But there is ample evidence to suggest that it can play a positive role in boosting corporate performance and potentially put more money in the pocket of shareholders.

Dr Farida Akhtar, a Senior Lecturer in the Department of Actuarial Studies and Business Analytics, conducted research into the issue of gender performance at the top of corporations. Her findings explode many myths still prevalent in the business world.

“Society generally accepts males in charge but when we look at the data, we actually find companies with female CEOs perform better,” says Akhtar. “And the same goes for companies with a substantial female representation on their boards."

Akhtar’s research looked at listed companies on the S&P500 Index from 2000 to 2015. Her work has been published in peer review finance journals and is listed in the Australian Business Deans Council Journal Quality List.

“Firms with a critical mass of females on the board (three or more) have a stronger corporate culture with regards to their intangible assets, including employees," Akhtar says. "Females are fundamentally different from males and bring unique demographic skills. They nurture their employees more. They create better reward systems and greater flexibility.

“Companies in high technology industries and those with unique products that are scarce in the market tend to do better with female CEOs. Success in Research and Development (R&D) is highly prized in these companies and female directors can shape innovation and sustainable growth strategies.”

Akhtar believes the market favours women because they are more likely to listen to the market.

“Female-led firms are more likely to reduce unrest within internal corporate governance and this superior monitoring of management leads to greater transparency and performance,” she says.

Akhtar names Shemara Wikramanayake of Macquarie Group, Alison Watkins of CoCa-Cola Amatil, Susan Lloyd-Hurwitz of Mirvac and Elizabeth Gaines of Fortescue Metals as among the top female leaders of Australian ASX 200 companies who are excelling in their roles.

Akhtar’s research suggests that while there are several factors at play in the slow growth of women's inclusion in top executive roles, such as traditional beliefs, culture, discrimination, low promotion rates and the ‘boys’ club’, one factor is particularly surprising, and disappointing.

“Companies in high-tech industries with a large proportion of institutional investors prefer more male directors. Institutional investors – and boards – say they want more female representation, but do they really? They spout diversity principles but they don’t actually follow through,” she says.

“The raw data indicates boards with that critical mass of three or more females and no institutional shareholders prefer female CEOs. If the CEO is also the chair of the company then that person is less likely to be female.

Also, in mature companies institutional shareholders prefer boards not to have three or more female directors.

Females are often appointed when companies are in a crisis phase but these appointments are more precarious and more heavily scrutinised.

“Female CEOs not only have to show they are fit for the top job based on their merit, they must also prove that they are super heroes. When they inevitably prove not to be super heroes, their dismissal harms the reputation of all females and hinders the promotion prospects of other women.

“Institutional shareholders also create a clear discrimination against female directors in the leadership appointment process,” she says.

Akhtar says the cultural norm that perceives women's leadership capabilities as lesser needs to change so that female CEOs have a fair chance to lead corporations, particularly in high-tech industries.

Akhtar also lampoons the perception that female CEOs will not be adventurous enough to grow the company. She says the pre-conceived notion that women are risk-averse is not backed by the evidence.

“There are two ways mature companies can grow – internally via innovation and externally via Mergers and Acquisitions (M&A). There is a preconception that females are risk-averse but the research indicates females are actually risk-loving and are every bit as likely as males to tackle ventures like high R&D projects,” she says.

“But it’s worse than that. A male CEO who proceeds with an M&A where the company does not perform well after the merger will be paid a bonus. A female CEO who does not proceed with an M&A because she exercises her judgement and assesses the merger will not generate substantial positive synergy in the long-term will be pushed out of the CEO position. The discrimination is huge. It is actually alarming.”

And there seems to be no valid reason for the discrimination. In fact, as Akhtar explains, large, complex corporations should appoint more female leaders because of their unique qualities.

“The greater investment in employee engagement and nurturing that is more typical of female CEOs tends to drive innovation and generate higher performance from staff. R&D's success drives greater company performance. This is especially important in high-tech industries where innovation is critical,” she says.

“The science says women are better leaders and companies led by women tend to do better, all things being equal.”

Akhtar says there are other benefits to fostering diversity.

“The value of a push for diversity quotas depends on the size, growth motives, board traits, governance quality and other factors within a corporation. Generally, when diversity is introduced to boards, they tend to become more effective in their decision-making and there is less absenteeism from board meetings," she says.

“But it’s not just a matter of adding a female to the board and watching profits rise. If it was that simple, everyone would just do it.

“Currently, policies are dictating research rather than being informed by research. It is important that we understand what is causing gender imbalance on corporate boards and among CEOs.

“Gender quotas to reach a critical mass of females on boards will help break the glass ceiling but more research is needed to determine the corporate traits that limit female CEO and board representation."

Overall, the results show that women-led companies appear better at meeting overall job satisfaction needs than those led by men. It is important to note that Peakon regularly surveys employees on a number of factors, but did not find any areas where male-led companies surpassed women-led ones. The two groups scored similarly on other workplace categories such as peer relationships, management support, compensation and rewards, employee growth, cultural fit, recognition and workload. It is worth noting that the differences between women and men-led companies could be because industries promoting female leaders might already be higher-performers when it comes to strategy and autonomy. Nonetheless, these initial findings provide a compelling argument regarding the benefits of a diverse leadership team.

This article is a tribute to our ladies who are doing good in Indian stock market generating profit on a daily basis using our Bank Nifty Option tips or Intraday trading tips and have made profit-making as a daily habit as this habit need to be inculcated.