As I mentioned last week, I am down with COVID and tired, so spending more time reading rather than working. I read Bill Browder's Freezing Order this weekend, and I highly recommend it. However, at the end of the book, Browder says that oligarchs, autocrats, and...
At the end of last year, there was a male-to-female ratio of 19:1 for CEOs and 6.5:1 for CFOs, which exposes a persisting underrepresentation of females in key executive positions. Within my Vistage groups, I am pleased to say that the male-to-female ratio is 11:3 for CEOs. However, that aside, some recent articles have shown the superior performance of companies that have women in C-Suite positions that are typically not reserved for females.
According to a study by S&P Global Market Intelligence, if you are looking for better returns, hire a female CFO! Companies that hired female CFOs saw, on average, a 6% increase in profits and an 8% better stock returns compared with the performance under male predecessors. The 6% increase in profits accounted for an additional $1.8 trillion in additional cumulative profits across 6,000 companies.
Thus, female CEOs drove more value appreciation, improved stock price momentum, better-defended profitability moats, and delivered excess risk-adjusted returns for their firms.
However, a new study by HEC Paris Business School and MVision Private Equity Advisers found that investment committees of private equity fund managers comprising both males and females have experienced comparatively higher returns compared to their male-only peers. Therefore, if PE firms want to outperform their peers, they should appoint more women to their investment committees. The diverse investment committees well outperformed their male-only counterparts! Professor Oliver Gottschalg found that on average, companies in the top quartile for gender diversity on executive teams were 21% more likely to outperform their peers, and 27% more likely to exhibit substantial value creation. Specifically, his research found that gender-diverse investment committees outperformed all-male committees in alpha, TVPI, and IRR by 7%, 0.52%, and 12%, respectively. The level outperformance is due to a broader base of perspectives and the subsequent avoidance of more blind spots!
So what is of interest is that while women’s participation in Investment Committees results in outperformance, Private Equity never received the memo. As can be seen from the chart below, women are very under-represented in the major Private Equity Groups
Not only that, Bloomberg has found that startups with all-male teams raise less money than those with a woman. Therefore, you would think all startups would be looking for female teammates. Unfortunately, many are run by men who “know best.”
Thus, while I am the first to say that correlation does not necessarily mean causality, there undoubtedly enough data to say, “If you want to realize above-average performance, put women in your C-Suite!”
This has to be one of the easiest things to improve your performance and make better decisions. If you say, “We just can’t find them,” you are not looking in the right place.
Copyright (c) 2019, Marc A. Borrelli
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