Board Games

Just out, a University of Exeter study of how companies fare when women are appointed to their boards.

Why, profit-wise, they do just great, thank you very much. Just as well  -- if not better -- than companies with all male boards. But, when it comes to stock market performance, these companies are systematically undervalued. (All boldface added by moi.)

The research suggests that shareholders respond negatively to women being appointed to their boards, causing share values to decline. This is consistent with other recent research that has examined responses to the appointment of female CEOs in the United States.

The team from the University of Exeter's School of Psychology and Business School conducted a comprehensive analysis of performance data from all FTSE 100 companies between 2001 and 2005. This found that companies with all-male boards had a market valuation equivalent to 166% of their book value, while companies with at least one female board member had a market value equal to just 121% of book value.

However, the research also showed that appointing a woman to a company board does not compromise objective measures of financial performance, specifically, Return on Assets and Return on Equity. In fact, within the data set as a whole there was evidence that companies with women on their board were a far better investment than those without.

This suggests that shareholders systematically over-value companies will all-male boards, while being unenthusiastic about the appointment of women to senior positions. This is despite there being no evidence that women's appointment has an adverse impact on company's performance.

The findings also fit with previous research from the University of Exeter which has shown that women are appointed to leadership positions when a company is in crisis. Dubbed the 'glass cliff' phenomenon, this trend involves women being placed in precarious positions when there is a high risk of failure. This has led to women being associated with weak performance.

Get this:

Lead author Professor Alex Haslam, a psychologist at the University of Exeter who developed the ‘glass cliff’ theory with his Exeter colleague Professor Michelle Ryan, said: “Our study shows very clearly that shareholders tend to devalue companies with women board members and to chronically over-value those with all-male boards. What is not clear is whether this is because shareholders feel that women perform less well on boards than men or whether they see a woman’s appointment as a signal that the company is in crisis. Whatever the reason, it is clear that this response is unwarranted, because there is no objective evidence that having female board members damages a company’s performance. If anything, the opposite is true.”

More:

The Exeter study comes just a week after a study by academics at the London School of Economics and Political Science found having more women in the boardroom can have "a negative effect on financial performance''.

While companies with more women on their boards tend to have better corporate governance, they are less profitable and have a smaller market capitalisation, according to the LSE paper.

Which makes sense, when you think about it. Men tend to be bigger risk-takers -- and that's not necessarily a good thing when it comes to high finance. Many have theorized that, had more women been in the investment banking business, there would not have been all that crashing and burning we saw last year.

But don't you just love these sexist terms??

Employing more women in the boardroom can wreak havoc on the financial performance of companies, fresh research suggests.

Two academics found that female directors were more likely to 'meddle' with boards and get rid of male chief executives who are not up to the job.

However, their more ruthless approach could produce unexpected results and be 'bad for a company's coffers', the study found.

Couldn't ''decrease profitability'' do? Couldn't ''hold to higher/tougher standards'' or ''question'' do?

That the studies contradict each other doesn't surprise me. Especially since I poked around the much more extensive relevant research on the U. of Exeter's site.

It's all about ''the glass cliff.''

Here's a definition:

 in a study of FTSE 100 companies, Haslam and his team discovered that most appointed women to senior positions only after a downturn in their fortunes, leaving them standing on the edge of a "glass cliff."

"It takes the form of a glass cliff, where women are more likely to be appointed to precarious positions than men," Haslam told the British Association science festival in Exeter.

"What was found was that in all of those cases women had only been appointed after company performance had slumped quite dramatically.

"So women are parachuted into rather hazardous leaderships situations. What is typically happening is that if everything is going well with a company there is no motivation for change; you can carry on with the same 'jobs for the boys' approach."

With failing companies likely to attract adverse media attention, women in "glass cliff" positions are more exposed to public criticism and risk being blamed for a management failure that had already occurred before their appointment, Haslam said.

All of which goes to show, to paraphrase Nicholas Kristof, had there been some Lehman Sisters in with those Lehman Brothers, maybe  the company would not have gone down in the biggest bankruptcy in U.S. history.

Bottom line: No wonder women are still fighting for pay equity. According to this research, as soon as they crack that glass ceiling, they're set up to fail.

Comments

[sooey]

The study also shows, though, that women are brought in at critical junctures, which to me says that the old boys network must realize women are more capable than men when times are tough.

The modern world of women's rights is turning many of the old myths inside out. This study could be saying that male execs are okay in the smooth sailing days, but you need female execs to weather the rough seas.

[glenfitz]

Antonia, much to my dismay and growing sense of gloom, you've managed to provide us a glimpse of just how pervasive male sexism is in even Western societies with their formalized politics of equality.

My gloom arises from the fact that our species must finally implode and collapse, in some sense, if the male component is so bent on the subjugation and war against the female half of its kind (or vice-versa).

How is it that our species has been so inclined to socially and economically cannibalize itself---one gender bent on the consumption of the other's opportunities?

What sexists of both genders don't grasp is that the other sex is fundamental to how we define our humanity. What would happen to my life-experience and identity as a human being without my sister, mother, wife and daughter?

What would happen to their life-experiences and humanity without their sons, brothers, and husbands?

We humans are all in the game of survival together.

We can't afford to pursue silly and divisive games of dominance if we really want to be around a century from now. We are all people. We are all humans. We ought to regard one another's well-being as highly as our own.

The most natural instinct we possess ought to be to defend and fight for one another, regardless of gender. I despair that humans have much of a future on this world.

[...pat.]

Hmmmm. Carol Bartz, who was brought in to run Autodesk, semi-retired to be the Executive Chair of the Board (if I remember her title correctly)... and left to run Yahoo! in January. So she was brought in to Autodesk when it wasn't doing much, made a success of it, and has been brought in to Yahoo when it's in trouble. OK, that case study seems to fit the parameters. Can't tell if the shareholders undervalued her, though, given pretty much all stocks are down.

[The Stygian and his Shemitish Dogs]

Glen Fiddich,

"We humans are all in the game of survival together."

We are?

[Keith]

In the first study, price to book value is a very poor gauge of investor confidence when used to compare companies in different industries. An engineering firm typically has little to no assets which causes them to have a very low book value. A Hotel chain on the other hand, has a tremendous amount of assets in the form of real estate. That real estate may be bought on credit which in turn takes away from the net worth of the asset, but the fact that the company owns the asset and has a likelyhood of earning on assets is what investors value.

The Price to Earnings ratio (PE) is the most commonly used yardstick for the potential that investors see in a company. The ratio is calculated by dividing the companies current Price per share by the earnings per share. Back in the late 90's investors felt that internet companies had the potential for making billions or trillions based on the prices they were paying for shares of internet companies that were making very little if any profits. PE ratios above 80 were common. The high PE ratio represented the desire of investors to own shares of the companies so that they could participate in the earnings that many thought would come in the future with the internet.

As for the so called Glass Cliff, I mentioned in few posts pasts how boards do not look kindly on CEO's who fail to take blame for thier own actions (or lack of action). Based on the studies time period, I suspect that it would be hard to find any company run by either gender that did well.

Something that points to the sexist bias of the authors of the first study is the fact that women are investors too. Surely women would support thier sisters by investing in those companies wouldn't they? Not according to this study, http://www.dailymail.co.uk/femail/article-1206053/Women-prefer-work-male-bosses-better-managers-prone-moods.html Over 60% of women would prefer that a man be thier boss. Seems even when women are given what they want, some women still cry discrimination.

[glenfitz]

Message to The Stygian and his Shemitish Dogs:

re: "We are?"

The meaning of my comment seems sort of clear. If we're NOT in the game of survival, together, than what gender do you think we can safely eliminate and still stay human? Female? Male?

And what would you put in the place of women, inflated "barbie" dolls?

We humans are in the "game" of survival together, whether we like it or not.

[Antonia]

Keith,

Yes, women are investors too but, as we know, they are not the ones who are moving, or were moving, massive amounts of shares via investment banks etc. As we know, it was mostly men on those trading desks.

And I strongly suspect, although I have no evidence, that day traders -- amateurs, basically -- are mostly guys. I know a lot of men who do this as a kind of game. I know not a single woman who plays the stock market on her home computer. I am sure such women exist but they must number very few.

Bottom line: Investors, or at least those doing the valuations, are men, by a huge majority. So your coda about sexist bias doesn't hold.

[glenfitz]

We can't just assume that because women might prefer male bosses to manage their particular workplace/department that they would also prefer a male to run the entire company.

Let's not forget that the article you refer to seems to be discussing women's preference for ,"immediate line," managers and not discussing a gender preference for corporate CEOs or senior board managers. The article explores the issue of who woman prefer to be their direct bosses.

A woman might prefer that male boss run her immediate department, but still find ample reason to invest in the company if it employ's women CEOs---reason such as increased opportunity for promotion.

The issue of women's preference for male bosses can relate to a situational and personal preference for the immediate workplace (woman are percieved as prone to mood swings) while the issue of female preference for the CEO can relate to a theoretical preference for management philosophy (i.e: team work, personal interaction, etc) of the company.

In other words, a woman might prefer a male boss in her immediate vicinity for personal reasons, but still feel a woman could do a better job of running the company as a whole.

Human behavior is often more complex than it seems. So we can't just make assumptions.

More study would be required to see if a woman's preference for a male as the immediate boss represents a blanket prejudice in favor of men to occupy senior management roles.

Moreover, you neglected to raise another important question. To what degree does women's preference for a male supervisor for the immediate workplace indicate cultural indoctrination (as opposed to male competence) of women to accept male authority?

So, the results of this study might also signify that woman have absorbed the sexist bias of men---that is to say, absorbed the stereotypical notion that P.M.S prone woman can't take charge the same way men can.

[glenfitz]

My last post was addressd to Keith, but his name got left out when I pasted into the comment box.

[Keith]

"or at least those doing the valuations, are men, by a huge majority."

This may be a good example of why women are so rear in the investment industry. Antonia the markets, ie investors who wish to buy or choose to sell a patircular stock set the stock price for a stock with the magnitude of their desire to obtain or unload thier shares. There is no patriacal boogie man sitting somewhere and setting these valuations. The market sets the price (Nominator)and the company's finacial performance sets the denominator for these Valuation ratios.

Another way of looking at it, is for every person buying a stock because they think the price will go up, there is another person who thinks the price of the stock is not going up and may actually be headed south, therefore they are selling. When there is an out of balance situation of buyers verse sellers, the price goes up.

What's your opinion of the study showing that women prefer to have male bosses? Seems the sisters may actually be responsible for that unequal proportion of women verse men in management positions. Ain't it a *itch when women are responsible for discriminating against women?

[Antonia]

@Keith:

It's an interesting survey by a polling company, although the questions and methodolgy have not been published anywhere that I can find.

Which is why I am more likely to rely on rigorous scientific and peer-reviewed research published in academic journals.

But hey, that's just me.

http://www.onepoll.com/press/

[The Stygian and his Shemitish Dogs]

"We humans are ALL in the game of survival together."

Glen Fiddich,

For many humans, survival mainly means protection (active or passive) from other humans.

It's the "all" I took issue with.

[glenfitz]

Antonia raises a critical point. Keith, the questions and methodology of the polling company is critical, but I haven't been able to find them either.

Give me the rigorous scientific and peer-review researched any day of the week.

But even given some formal academic credibility, a poll that indicates that women prefer male bosses for their immediate workplace doesn't translate into the conclusion that they would then show a blanket prejudice in favor of male CEOs to run the whole company.

It could be that their preference for a male boss is merely situational to the local workplace (there are good reasons to believe this is the case) and does not indicate any blanket bias in favor of men.

Of even greater significance than the absence of formal academic credibility is the deficient logic of this particular assertion.

[glenfitz]

Keith asks:

"What's your opinion of the study showing that women prefer to have male bosses? Seems the sisters may actually be responsible for that unequal proportion of women verse men in management positions. Ain't it a *itch when women are responsible for discriminating against women?"

Again to belabor the point, it's really stretching it to claim a woman's personal preference for male bosses over her immediate workplace vicinity represents a blanket prejudice in favor of men to run corporations.

How does a woman's preference for a male supervisor due the issue of personal interaction (moodiness) get automatically translated into a preference for a male CEO's management philosophy?

The logic doesn't add up. I don't see it.

[glenfitz]

Here's another point for Keith to ponder. That some study might be made to credibly indicate that women discriminate against female corporate heads, raises another question.

We might ask whether women's prejudice against female CEO heads is due to the anti-feminist cultural indoctrination of our male dominated institutions and culture?

Again to say, even if the study is credible, we wouldn't necessarily interpret its results to mean women have some good reason to oppose their "sisters" as the heads of corporations.

I think over-all, your logic is very iffy. I wouldn't draw to many fast and loose conclusions from the study you referred to.

[Keith]

Antonia,
I seem to be having a problem finding a peer review of the "Glass Cliff" studies. Would you do me a favor and point me toward one.

It seems to me that the entire glass cliff theory could have been developed as a safety net theory to the study of the performance results of women as CEO's.

[Alex Haslam]

In response to Keith's comment above "price to book value is a very poor gauge of investor confidence when used to compare companies in different industries".

This is obviously true, and something of which we were well aware. Accordingly, in our research we controlled for a number of potential confounds statistically. The reported effects (which were very large indeed!) were observed once taking account of (a) sector type ('masculine' vs 'feminine'; financial vs non-fianancial),(b) company size, and (c) number of employees.

Also, I'm not sure how the fact that women are investors as well as men, is evidence that our research is sexist. Nowhere in our article did we refer to investors as male, or assume that they were. The two points that emerged from our data -- and which we wanted to bring to light -- were simply (a) that companies with all-male boards are chronically over-valued by investors, and (b) that this has no objective basis in company performance.

If anyone (like Antonia) would like original peer-reviewed articles on the glass cliff, please contact us at the University of Exeter. Thank you too for the range of interesting comments here, and to Antonia for her initial, very detailed, summary.

[Antonia]

@Professor Haslam:

Wow. Thanks for dropping by. How did you find Broadsides?

While you are here, perhaps you might explain the meaning of ''peer-reviewed'' to Keith, whose Men's Rights Activists Forum buddies obviously couldn't help him out with this one.

Keith, I leave you in capable hands. I am sure Professor Haslam can answer all your questions, and those of your fellow MRAs.

[Keith]

Alex,

If women represent half of all investors and since your study showes that investors as a group valued male run companies, verse those with female board members wouldn't it be correct to draw the conclusion that women perfer with thier hard earned savings dollars, male run companies?

In addition, I have participated in the finanicail markets for over thirty years. I am well versed in Technical Analysis and have never once heard of sectors being divided into masculine and feminine sectors. Could you explain what qualifies a company to fall into each of these "sectors" and the adjustment your study made to accomidate for each stock's "Gender"?

As for a peer review of your study, I suspect that since your study was relatively recently published that no one has yet to perform a peer review. Are you aware of anyone performing a peer review?

[Antonia]

Keith, do you have any idea what peer-reviewed means?

Haslam's most recent study was just published here http://www.wiley.com/bw/journal.asp?ref=1045-3172, in the British Journal of Management, where it is subject to the scrutiny of other experts in the field who can review its methodology, sampling, etc.

More: http://www.wiley.com/bw/journal.asp?ref=1045-3172

''Articles which have been fully copy-edited and peer-reviewed are published online through our Early View feature before the print edition of this journal is published.''

Where was your poll published and subjected to scrutiny?

And, while we're at it, do you know what ''controlled-for'' means?

[Keith]

Antonia, Studies are published in acedemic Journals so that they can be reviewed by others in the field. Most any publisher will perform a cursery review however a complete indepth review takes nearly as long as the original study. Did the Star perform a peer review of your claim that "Femicide" is the leading cause of premature death of women? If they had, it never would have been published.

[Alex Haslam]

Keith,

Thanks for the response. I'll try to address the points you raise briefly.

1. It certainly wouldn't be correct to conclude from our study that "women prefer [to invest] their hard earned savings dollars [in] male-run companies". First, because I doubt very much your suggestion that women were responsible for 50% of the decisions here. However, second, and more importantly, the point of our study was not to say that these decisions were restricted to men. That is, we concluded that investors were making faulty decisions (and displaying prejudice) not that male investors were. In that respect we hoped our results would prove as enlightening for women as they were for men.

2. Yes, our research was peer-reviewed. It was initially conducted in 2007 (which is why the data only covered 2001-2005, as these were the only complete data sets that we could compile at the time). We first submitted it for publication about a year ago, and once we had done this received feedback from three reviewers who raised a series of issues and questions, and aalso sked us to make some changes to the manuscript. For example, one reviewer raised the possibility that our findings reflected the fact that companies with male-only boards were working in more 'masculine' sectors (like mining; rather than 'feminine' ones like hospitality) in which stock values are traditionally inflated. Accordingly, we had to code for this factor and rerun the analysis to see whether this as the case. It wasn't. However, the review process was reiterated twice until we had resolved all such points and the paper was eventually accepted for publication.

I won't go on here, as I think a lot of these points would be clearer were you to read the papers themselves (which really the main point I wanted to make yesterday). If you're interested, I'd also be happy to send you the reviews. I'll bow out of the exhange now, though, and hope that the debate continues, but moves forward.