New research indicates female CEOs endure much more shareholder activism than their male counterparts


TEMPE– A recent study from the W. P. Carey School of Business at Arizona State University has found that female CEOs endure much more shareholder activism than their male counterparts. Although women make up half of the nation’s workforce, only 5.1 percent of Fortune 1000 companies have female chief executives. Now new research from ASU says that female CEOs are far more likely to be targeted by shareholder activism than men occupying the same leadership position.

Based on a 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 at Arizona State University noticed that a big share 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 says, were a little “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,” says Shropshire. “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 savvy 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 says. “Those effects aren’t just to the firm announcing its female CEO. There are negative spill-over market effects for other female-led firms at the same time.” Activists 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, says Shropshire, it’s not all “doom and gloom” for women in the c-suite. Although female-led firms receive disproportionate amounts of shareholder activism, her research shows they can do something about it.

While female CEOs endure much more shareholder activism than their male counterparts, they can fight the trend with proactive PR. “Historically female CEOs garner far more media attention than their male counterparts and not for corporate performance and policy decisions alone,” Shropshire remarks 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.”

Given the scrutiny women chief executives endure, Shropshire wondered if having more public information from financial analysts, the media and the firm itself — a.k.a. public relations efforts — could moderate the shareholder activism these same women face.

While the volume of information from these sources affects male- and female-led firms similarly, the content is also important. Analyst ratings only affect activism toward male CEOs, as the gender signal seems to override the competency signal provided by financial analysts. However, if PR from a female-led firm uses more gendered language (“she”, “Mrs.”, “mother”) it further increases the likelihood she faces activism by another 31 percent. And when a female CEO’s name is mentioned frequently in media coverage, it nearly guarantees her firm will be targeted (predicted probability above 96 percent).

Shropshire says this reflects status characteristics theory in action. “Especially with new CEOs, investors face asymmetric information and evaluation challenges, and that makes shareholder activists more likely to respond based on stereotypes and status threats,” Shropshire explains. “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.”