When completing our most recent analysis into shareholder activism in Europe, we identified many interesting insights. One of those was around the role of gender diversity on boards generally and Women chief executives specifically, when it comes to shareholder activism.
Our analysis showed that whether or not the chief executive of a UK listed corporate was a man or a woman made no difference to whether that company would be the target for a public activist programme. Since 1 January 2015, 4.5 per cent of UK corporates targeted by activists had women chief executives, and this exactly mirrors the percentage of women chief executives in the FTSE350. Further, our analysis found that the greater the proportion of women on a full board, the less likely that company was to be targeted.
In marked contrast to the above however, a recent study by Arizona State University found that women chief executives of Fortune 1000 companies are over three times more likely to be targeted by activists. Dr Christine Shropshire, the academic who undertook the research, contends that this is because female leaders are believed to be more collaborative but less commanding. In the minds of US-based activists, she argues, this translates into a weakness that makes them easier to sway or bully.
Research by Credit Suisse into 3,000 of the world’s largest companies showed clear evidence that companies with a higher proportion of women in decision-making roles generate higher returns on equity. And where women account for the majority of top management, the companies showed better sales growth, high cash flow returns on investments and lower leverage. Amongst companies with a market capitalisation in excess of $10bn, Credit Suisse found that this trend was actually more pronounced in the US than in Europe.
The findings of Dr. Shropshire’s research are all the more perplexing when one considers that a significant and growing proportion of European approaches are now carried out by US activists. Over the past year, US activists almost doubled their share of European campaigns to 30 percent, according to Activist Insight. So, do the leopards change their spots when they come to Europe?
It could be that the evolution in approach is deliberate. US activists understand that to successfully build a case for change in Europe, they need to adapt their own behaviour to a legal and social backdrop that places great value on collaboration and discussion. Perhaps this change in approach has also influenced their investment calculus so that leadership characteristics that were deemed to be weak in a different cultural context are now seen to be strong?
Whatever your own personal view, it seems clear that corporates and investors would benefit from more research into the area.
But the observation also points to the broader truism that, beyond gender, we need to take more seriously the importance of diversity in the boardroom, specifically diversity of thinking. Boards that are comprised of multiple cultural, demographic and professional backgrounds tend to perform better because diversity of thinking increases problem solving ability, creativity, and innovation.