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Fortune: Female-Led Businesses Beat the Stock Market, But Their Numbers Remain Low

| Wednesday July 16th, 2014 | 1 Comment
Ursula Burns, Chairman and CEO, Xerox. Photograph by Stuart Isett/Fortune Most Powerful Women

Ursula Burns, chairman and CEO, Xerox.

According to a recent Fortune study, the number of women CEOs in the Fortune 500 is at its highest total yet at 24 (51 in the Fortune 1,000).

Despite this overall low number, Fortune illustrated some interesting trends, including data that shows that women-led businesses posted better returns than the stock market and generated more than their share of Fortune 1,000 revenue. However, the number of women CEOs has risen extremely slowly in the past decade, and the number of women on boards has stagnated despite an abundance of evidence that women-led companies fare better and that women make good leaders.

Fortune reports:

  • Only 5 percent of Fortune 1,000 companies have female CEOs, but they are responsible for 7 percent of the total Fortune 1,000 revenue. The biggest woman-led company is General Motors (Mary Barra) coming in at No. 7 on the 2014 Fortune 500 List ($155 billion in 2013 revenue).
  • Fortune 1,000 companies led by women outperformed the S&P 500 Index during their respective tenures. The average return was 69.5 percent, whereas female CEOs posted an average return of 103.4 percent. Home Shopping Network’s Mindy Grossman and TJX’s Carol Meyrowitz are two of the CEOs who reported the highest returns during their time as chief.
  • Fewer than half of female CEOs have a graduate business degree; the most common degree is engineering (another solid reason to encourage girls to pursue STEM careers).

Studies like this and others consistently show that female leaders and board members are good for business, yet in addition to the small number of female CEOs, the number of females serving on boards is also small and not growing. At the end of 2013, Catalyst reported that: “Women held only 16.9 percent of corporate board seats in 2013, indicating no significant year-over-year uptick for the eighth straight year. And only 14.6 percent of Executive Officer positions were held by women—the fourth consecutive year of no year-over-year growth.” In addition, women of color only hold 3.2 percent of board seats, and 10 percent of Fortune 500 companies have no women serving on their boards at all.

Ilene H. Lang, president & CEO of Catalyst said: “Diverse business leadership and governance are correlated with stronger business performance, employee engagement and innovation. Shareholders beware: A company with no women at the top is missing one of the biggest opportunities in the marketplace today.”

Another Catalyst study compared the performance of the companies with the highest number of women on their boards with the lowest. It identified three important areas: return on equity, return on sales, and return on invested capital. It found that, on average, companies with the highest percentages of female board directors outperformed those with the least by 53 percent (return on equity), 42 percent (return on sales) and 66 percent (return on invested capital).

Are women better leaders than men? In a three-part article series for Business Insider, Bob Sherwin, COO of leadership consultancy Zenger Folkman, examined women’s leadership effectiveness, representation in corporate America and solutions for increasing their ranks. Using a sampling of just under 16,000 leaders worldwide (one-third female, two-thirds male), with each participant having an average of 13 respondents (including their manager, their direct reports and their peers), Sherwin showed that women outperform men in many leadership measures.

In overall leadership effectiveness, women scored 54.5 percent, versus men at 51.8 percent (Sherwin adds that due to the large sample size, this number is statistically significant). Women also outperformed men in 12 of 16 individual measures, including ‘takes initiative,’ ‘displays high integrity and honesty,’ ‘inspires and motivates others,’ ‘builds relationships,’ ‘collaboration and teamwork,’ and ‘champions change,’ among others.

What causes these differences? Sherwin asked these women and they responded, “‘In order to get the same recognition and rewards, I need to do twice as much, never make a mistake and constantly demonstrate my competence.’ (The shorter version of what we regularly heard from women was that ‘we must perform twice as well to be thought half as good.’)” The study also found that women continued to ask for feedback and worked to improve long after men stopped asking (around age 40), perhaps thinking that they were doing well and needed no further feedback. Sherwin also reported that the higher women rose inside an organization, the better they were perceived.

So why don’t more companies have female board members and CEOs? It’s hard to say. Sherwin has this advice for companies looking to advance more women to the c-suite: institute formal mentoring programs, implement more development opportunities to increase the number of women in managerial and supervisory positions, and recruit internally to promote women to the c-suite and board.

“Attracting the best talent is still the most important factor in business success and is every leader’s number one priority,” Thomas Falk, chairman & CEO of Kimberly-Clark Corp. told Catalyst. “Companies that have improved their representation of women are attractive employers to all the talent available. For those that have not improved, you have to wonder how long they can be successful if they are only hiring from half of the talent available. This issue is not about equity or fairness, it’s about winning.”

Image credit: Photograph by Stuart Isett/Fortune Most Powerful Women. Flickr creative commons license.


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  • robbinsons

    In overall leadership effectiveness, women scored 54.5 percent, versus men at 51.8 percent (Sherwin adds that due to the large sample size, this number is statistically significant). Women also outperformed men in 12 of 16 individual measures, including ‘takes initiative,’ ‘displays high integrity and honesty,’ ‘inspires and motivates others,’ ‘builds relationships,’ ‘collaboration and teamwork,’ and ‘champions change,’ among others

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