“Do activist investors target female CEOs?”
Dealbook columnist Andrew Ross Sorkin ruffled some feathers on Wall St. earlier this week when he posed that question for a piece.
If it’s not obvious, the outrage comes from the implication that women might be seen as “softer targets,” meaning that they are more likely to bend to the demands of the activist investor.
But for Wall Street’s masters of the universe, if their primary focus is to generate above-average returns, it may make sense to simply invest in an ‘all-female CEO portfolio’ and leave the managers alone to do their work.
Women-led companies outperform
The S&P 500 includes 23 women-led companies. On average over the last 12 months, the stocks of the 23 companies led by women have outpaced the Dow, the NYSE, and the S&P 500 with a mean share price gain of 19.79%.
Further, just three out of 23 woman-led companies on the S&P 500 posted share price losses over the last 12 months.
Bespoke Investment Group astutely pointed out the difference in performance between companies led by women compared to those run by men. And, activists may want to chart a new course based on it.
S&P 500 companies with female CEOs have outperformed S&P 500 companies with male CEOs over the last year (19.5% vs 14.9%).
— Bespoke (@bespokeinvest) February 11, 2015
Activists are notoriously short-sighted as investors, and draw criticism for failing to focus on long-term viability of a company in lieu of a quick score and an exit.
But based on recent stock performance — which really is all that matters to many activists — targeting female CEOs isn’t just bad PR, it’s also an awful strategy.
Worse still, the men running hedge funds might be upset to learn a recently-published study says women are less likely to lose money than their male counterparts.
While no bankers and hedge fund managers are eager to discuss the topic on record, one female CEO on Wall St. was willing to address the issue.
“The number of top female CEOs being targeted by [activist] investors is highly suspicious,” the executive said to Business Insider. “There are some numbers that are highly disturbing.”
There aren’t many female CEOs
There is a chance the aberration of so many activists targeting so few female CEOs is impacted by the relative dearth of women running companies.
Women make up 4.6% of the CEOs of S&P 500 companies, but across the US, they only represent about 3.5% of CEOs.
According to a 2014 Credit Suisse report, that puts the US behind the global average of 3.9% of companies being led by women.
All of this seems to support a line oft-repeated by women of Wall St.: ‘Lehman Brothers would still be alive today, if it had been Lehman Sisters.’