Sexist Shareholders and the Underperformance of Women CEOs

In my article on Marissa Mayer, the newly-appointed CEO of Yahoo! (NasdaqGS: YHOO), I discussed her moral dilemma as a working mom in satisfying the needs of two separate constituencies: (1) the Yahoo! shareholders who pay her multi-million dollar salary and need her full-time attention to turn around the struggling Internet company; and (2) her soon-to-born son who deserves a full-time mother.

Mayer’s quixotic attempt to “have it all” cannot possibly work, as described in a recent Atlantic Magazine article entitled “Why Women Still Can’t Have it All”. According to author Anne-Marie Slaughter, a former high-ranking official in the U.S. State Department, she was surprised to discover:

How difficult I was finding it to be away from my son when he clearly needed me. I was increasingly aware that the feminist beliefs on which I had built my entire career were shifting under my feet. When people asked why I had left government, I explained that I’d come home because of my desire to be with my family and my conclusion that juggling high-level government work with the needs of two teenage boys was not possible.

Happiness is More Important Than Professional Success

Slaughter argues that a mother’s first priority should be the “happiness project,” which means quality time with their children:

As a daughter of Charlottesville, Virginia, the home of Thomas Jefferson and the university he founded, I grew up with the Declaration of Independence in my blood. Last I checked, he did not declare American independence in the name of life, liberty, and professional success.

Let us rediscover the pursuit of happiness, and let us start at home. Let us rediscover the pursuit of happiness, and let us start at home.

To be clear, Ms. Slaughter wishes that women could have it all, but recognizes that it is impossible under present societal circumstances.

Women CEOs Underperform Men CEOs

The CEO position is an extremely-demanding job that requires an all-encompassing effort to be done well. Looking at the performance of women CEOs over the past decade, many of whom have not been able to exert maximum effort because of child-rearing responsibilities, the results are mixed. According to USA Today, in the seven years between 2003 and 2009, men beat women 4-2 with one tie:


Fortune 500 Companies with Women CEOs

S&P 500





Women by 25%




Men by 6.8%




Men by 12%








Men by 0.1%




Men by 4.2%




Women by 25%

According to a 2004 NYU study:

Studying a sample of 58 companies run by female CEOs over the 20-year period between January 1985 and December 2004, I find that female CEO-run companies significantly underperform male CEO-run companies in the year following the female CEO appointment.

Starting from the second year after the female CEO appointment no statistically significant differences in stock price performance between female CEO and male CEO run companies was observed.

This result surprised the author, who had hypothesized going into the study that women would outperform:

Because women are discriminated when it comes to promotion to higher management positions, I hypothesized that women who ultimately reach the position of CEO possess superior skills relative to their male counterparts. Therefore, I predicted superior performance from female CEO led companies.

Sexist Shareholders Are the Cause of the Women CEO Underperformance

A 2010 Harvard study offers up a reason for why female CEOs underperform during their first year and it has nothing to do with female competence: gender bias by institutional shareholders (that control 80% of stock trading) who sell the shares of companies run by women:

Female directors have negative effects on stock value and no effects on profits.

In other words, female CEOs run companies just as well as men, but sexist shareholders sell anyway and cause the stock price to decline. This seems to present a trading opportunity: wait for the sexist shareholders to put selling pressure on the female-run companies and then scoop up the depressed shares at bargain valuations and ride them back up when investors realize that the company’s profitability has not been adversely affected as feared.

Women Board Members Offer a Different Performance Story from Women CEOs

Whatever detrimental effects raising young children may have on the job performance of female CEOs does not appear to be relevant to female members of a corporation’s board of directors. The reason is that the time commitment of board members is much less demanding (e.g., 4-8 meetings per year) than the time commitment of a day-to-day, hand- on CEO.

Next week I’ll move from the CEO suite to the boardroom to examine what effect the introduction of women to a company’s board of directors has on longer-term stock performance.

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