Canadian HR Reporter

CANADIAN HR REPORTER October 3, 2016 6 NEWS New female CEOs faced with greater shareholder activism: Study But proactive, gender-neutral public relations can moderate effect BY SARAH DOBSON FEMALE CEOs are more likely to be targeted by shareholder ac- tivists than male CEOs, accord- ing to a study from Arizona State University (ASU). e research examined shareholder proposals at Fortune 1000 companies from 2003 to 2013. "Controlling for other reasons investors target certain firms, our models show that gender alone explains significant activism spe- cifically toward female CEOs," said Christine Shropshire, associ- ate professor of management at the W.P. Carey School of Business at ASU in Temple, Ariz. "All else held equal, female CEOs have a 27 per cent likeli- hood of facing activism, while their male counterparts have a near zero predicted likelihood of being targeted." One possible reason for the discrepancies could be activists perceive a female CEO appoint- ment as a "status threat" to their investment, said the authors. "Activists look to their environ- ment to resolve the equivocality between the high status of CEOs and lower status role of females. Gender bias research reveals consistently negative outcomes for female leaders, which collec- tively informs our understanding of gender as a diffuse status cue. From this perspective, activists interpret the appointment of a female CEO as a status threat to their investment and target their efforts accordingly." Even if it seems very biased be- haviour in the collective way, "it's rational, it makes sense that you would speak up because this is in- forming a threat to the value that you hold in the company," said Shropshire. Underlying the activism are "gender role theories" and ste- reotypes around male and female leadership. How people evaluate and assess a new person is driven a lot by underlying biases, said Shropshire. "ere's evidence of more irra- tional gender bias investor behav- iour that we would say actually in- forms a more rational, risk-driven response from activists. ey see that this is a status threat to their investment, they know that there's this negative, this hit to the value that they hold, so that makes them more likely to speak up — regard- less of whether they're asking for a seat on the board or they're in- terested in seeing further gender diversity on the board." It makes sense investors' reac- tions are considered rational ones, said Heather Foust-Cummings, vice-president and centre leader at the Catalyst Research Center for Equity in Business Leadership in Boston. "If you believe your invest- ment will be negatively impacted, it makes sense that you would be concerned. It's twofold here: a) We wouldn't have problem if gender bias didn't exist and then b) because gender bias does exist, we have this problem." However, the study doesn't dif- ferentiate between shareholder activism focused on a broad range of environmental, social or governance issues and change- of-control activism, said Kevin omas, director of shareholder engagement at SHARE (the Shareholder Association for Re- search & Education) in Toronto, where short-term investors try to make changes to wring some short-term profits. In the United States, for exam- ple, there have been shareholder proposals related to non-dis- crimination and equal employ- ment policies and increasing diversity, "so those proposals probably were not at all hostile to the idea of female CEOs but they would get lumped in with this other group," he said. Many institutional investors believe that having women in leadership is actually a good thing for the long-term value of compa- nies they invest in, he said. "eir focus is on the perfor- mance indicators of the company and it's not going to tend to be swayed by, in the long term, who the CEO is." But the researchers didn't find a difference between social issue- related activism and financial or governance-related activism, said Shropshire. "We find the effects consistent across both of those broad cate- gories, so the focus on the overall effect is including all of those cat- egories of activism." Media influence The researchers also looked at how the content provided by the media, financial analysts and the CEO's firm influences activism. "Given the strength of status threat, there are also likely gen- der differences in the impact of the content provided, whether it mitigates or reinforces the status threat and investors' subsequent activism," they wrote. When women are in roles that are beyond the scope of tradi- tional stereotypes, they always face greater attention and greater scrutiny, said Foust-Cummings. "There are a number of ste- reotypes, of course, that exist for women in the workplace and women in society, and this is what we see play out, is that women are rewarded and connected to femi- nine behaviours, so women are viewed as taking care, whereas men are viewed as having mas- culine behaviour where they take charge and they are rewarded for that. "So women are often rewarded for supporting behaviour or re- warding behaviour — mentoring and networking and teambuild- ing — whereas men are often rec- ognized and rewarded for being tough and taking charge and (be- ing a) problem-solver and delegat- ing and being authoritative, and so when we see people hold po- sitions that are inconsistent with those stereotypes, then it makes us perk up… and so the scrutiny that these women are facing is be- cause of these steoretypes." ere's still a disconnect be- tween mythologies and biases about women in leadership and reality, said omas. "e reality is that companies with women on the board or women in leadership positions are performing better than their peers, especially over the long run, so that doesn't necessar- ily speak to causality, but it does mean that there's still an idea, especially among conservative investors, that somehow this is an anomaly, he said. "ere's evidence of more irrational gender bias investor behaviour that actually informs a more rational, risk-driven response from activists." USING > pg. 17 Credit: Lucas Jackson (Reuters) Indra Nooyi, CEO of PepsiCo, takes part in a panel during the Women In The World Summit in New York on April 8.

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