I read a full-page article in yesterday’s Daily Mail with mounting disbelief. It was written by a young journalist, Ruth Sunderland, and it’s about the financial returns in 2013 of FTSE350 companies with female chief executives:
The article is the usual mix of celebrating women who are successes, whilst downplaying women who are failures. Of the four FTSE100 female CEOs, only one can be reasonably said to have delivered a strong performance in 2013 – Carolyn McCall of EasyJet. Let’s consider the three others:
Imperial Tobacco – shares down 8%.
Burberry – shares up 13%, very much in line with the FTSE100 average.
Royal Mail – shares up 78% but to quote Ms Sunderland, ‘The huge hike in the Royal Mail price owes far more to the fact that shares were woefully underpriced than to the acumen of Moya Greene.’
So, just one of the four female FTSE100 CEOs performed more strongly than the average male FTSE100 CEO in 2013. The article’s downplaying of female failure is breathtaking:
Cynthia Carroll left the top position at mining giant Anglo American earlier this year after disappointing investors and has been replaced by a man.
‘Disappointing investors’? They lost their shirts. In the course of Cynthia Carroll’s five-year tenure at Anglo American £9 BILLION was wiped off the company’s value. The following is a link to our piece on the matter, along with further information on the performances of other female CEOs:
Which brings us to Susan Vinnicombe of the Cranfield International Centre for Women Leaders. She’s long been the world’s leading academic advocate for more women on boards. In July 2012 she admitted to a House of Lords inquiry that she had no evidence of a causal link between increasing female representation on boards, and enhanced financial performance:
Her exact words:
Thirdly, there has been quite a push in the past – indeed, we ourselves have engaged in such research – to look at the relationship between having women on corporate boards and financial performance. We do not subscribe to this research. We have shared it with chairmen and they do not think that it makes sense. We agree that it does not make sense. You cannot correlate two or three women on a massive corporate board with a return on investment, return on equity, turnover or profits. We have dropped such research in the past five years and I am pleased to say that Catalyst, which claims to have done a ground-breaking study on this in the US, officially dropped this line of argument last September.
From the Daily Mail article:
Much as the feminist lobby might wish to claim a victory for woman-power, however, it is impossible to prove that female directors are likely to deliver better returns than men.
It is impossible to prove that, for one simple reason. The nearest we have to proof of the impact of increasing the proportion of female directors is five longitudinal studies, all of which show corporate financial decline resulting. Our short briefing paper with the studies’ full Abstracts:
Back to the article:
Professor Susan Vinnicombe of the Cranfield University School of Management, which compiles the annual Female FTSE Board Report, says: ‘It is very difficult to say that superior performance is due to a boss being a woman. But there is mounting research that suggests having women on the board is associated with stronger financial performance. This is not quite the same as saying women are the cause of the performance, but there is a strong correlation.’
We get so tired of this sort of tortured language:
‘… suggests having women on the board is associated with stronger financial performance’
‘This is not quite the same as saying women…’
IT’S NOT REMOTELY THE SAME. Most readers of the article will reasonably assume correlation is an indicator of causation, but all the reports and studies we’ve seen presenting correlations (McKinsey, Credit Suisse, Reuters Thomson, Catalyst…) say that not only is correlation not an indicator of causation, it shouldn’t be taken to even infer it.
It’s long overdue for us to publicly challenge Susan Vinnicombe. We’re making two challenges:
We challenge you to stop misleading people into believing correlations between increased female representation on boards and enhanced financial performance are, or may be, indicative of a beneficial gender effect, thereby justifying in some people’s minds (not ours) the government’s policy direction of pressuring companies to increase the number of women on their boards, through the threat of legislated gender quotas.
We challenge you to critique and discredit the five longitudinal studies which show that increasing female representation on corporate boards leads on average to corporate financial decline.
So why are there (on average) positive correlations between increasing female representation on boards, and enhanced financial performance? In our view it’s because strongly performing companies can better afford to indulge in some social engineering, and in some sectors where women make up the majority of customers (e.g. the retail sector) it’s also good PR. A gender analogy from outside the workplace – when rich men marry beautiful women, we don’t say the women caused the men to become rich, do we?