Human Resources Issues for Senior Management
Issue link: https://digital.hrreporter.com/i/747024
CANADIAN HR STRATEGY/27 P ERHAPS NOT surprisingly, because of the novelty factor, female CEOs are more likely to be targeted by shareholder activ- ists than male CEOs. After all, there was just one woman among the 87 incoming CEOs in the U.S. and Canada in 2015, ac- cording to PwC. But there are proactive steps employ- ers can take to combat the potential tide of negativity, accord- ing to a study out of Arizona State University (ASU) that looked into the phenomenon. "Controlling for other reasons investors target certain rms, our models show that gender alone explains signi cant activism speci cally toward female CEOs," says Christine Shropshire, associate 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 appointment as a "status threat" to their investment, says the study, which examined shareholder proposals at Fortune 1000 companies from 2003 to 2013: "Ac- tivists look to their environment to resolve the equivocality be- tween the high status of CEOs and lower status role of females. Gender-bias research reveals consistently negative outcomes for female leaders, which collectively informs our understand- ing of gender as a diffuse status cue. From this perspective, ac- tivists interpret the appointment of a female CEO as a status threat to their investment and target their efforts accordingly." But even if it seems to be very biased behaviour, "it's ratio- nal, it makes sense that you would speak up because this is informing a threat to the value that you hold in the company," says 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, she says. "There's evidence of more irrational gender-bias investor behaviour that we would say actually informs a more rational, risk-driven response from activists. They 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 — regardless of whether they're asking for a seat on the board or they're interested in seeing further gender diversity on the board." If you believe your investment will be negatively impacted, it makes sense you would be concerned, says Heather Foust- Cummings, vice-president and centre leader at the Catalyst Research Center for Equity in Business Leadership in Boston. "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, there can be a difference between shareholder activism focused on a range of environmental, social or gover- nance issues and change-of-control activism, where short-term investors try to wring short-term pro ts, says Kevin Thomas, director of shareholder engagement at SHARE (the Sharehold- er Association for Research & Education) in Toronto. In the United States, for example, there have been share- holder proposals related to non-discrimination and equal-em- ployment policies and increasing diversity, he says, "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." Many institutional investors believe that having women in leadership is actually a good thing for the long-term value of companies they invest in, says Thomas. "Their focus is on the performance indicators of the compa- ny and it's not going to tend to be swayed by, in the long term, who the CEO is." But the researchers didn't nd a difference between social issue-related activism and nancial or governance-related activ- ism, says Shropshire. "We nd the effects consistent across both of those broad categories, so the focus on the overall effect is including all of those categories of activism." MEDIA INFLUENCE The researchers also looked at how the content provided by the media, nancial analysts and the CEO's rm in uences activism: "Given the strength of status threat, there are also likely gender differences in the impact of the content provided, whether it mitigates or reinforces the status threat and inves- tors' subsequent activism." When women are in roles that are beyond the scope of tra- ditional stereotypes, they always face greater attention and greater scrutiny, says Foust-Cummings. "There are a number of stereotypes, 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 feminine behaviours, so women are viewed as taking care, whereas men are viewed as having masculine behaviour where they take charge and they are rewarded for that. "So women are often rewarded for supporting behaviour or rewarding behaviour — mentoring and networking and team building — whereas men are often recognized and rewarded for being tough and taking charge and (being a) problem solver and delegating and being authoritative, and so when we see people hold positions that are inconsistent with those stereotypes, then it makes us perk up… and so the scrutiny that these women are facing is because of these stereotypes." There's still a disconnect between mythologies and biases about women in leadership and reality, says Thomas. "The 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 necessarily feature/DIVERSITY