Women CEOs: Good for Returns

Add this to the ever-growing pile of research that female executives are good for business: a study found that companies with women executives outperformed the benchmark index. Further, these companies had 25% annualized returns over time, compared with 11% for the World MSCI Index. The study, conducted by Scandinavia’s largest bank, Nordea Bank AB, looked at over 11,000 companies worldwide.

While the results are certainly encouraging, an in-depth Washington Post article that quoted Robert Naess, the portfolio manager who conducted the study, was less so. His explanations for why women-led companies were more successful included the following:

  • Women tend to lead “less volatile” companies
  • Analysts have slightly lower earnings growth expectations for women-led firms, so any growth would have a positive affect on stock performance.

All but the most reasonable possible explanation, which Naess gets to in a follow-up email: “Naess said the explanation could also simply be that the women were better managers.” The most obvious reason why women-led companies perform better is an afterthought—and the main reasons given for performance were about setting the bar extremely low for female leaders. If you need an example of what unconscious bias looks like, this is it.

If we want some data without the backhanded compliment, better look to Credit Suisse’s Research Institute 2020 Women on Boards:

“Shares of companies where women make up 25 percent of senior managers had annualized average stock returns of 22.8 percent over five years, while those with women in more than 33 percent of senior management roles had a 25.6 percent average annualized return, the study found.”

I think that between this study and the Nordea study, the numbers speak for themselves. One day, I hope the assumption will be that women-led firms outperform because they are good leaders and that perhaps even further down the road, there will be no study needed at all.

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