ITHACA, N.Y. – Investors view CEOs more favorably when they respond to shareholder activism in ways that conform to gender stereotypes, according to new Cornell University research.
Female CEOs were held in higher regard when they reacted to shareholder activism – attempts by shareholders, often hedge funds, to wield their influence as partial owners to bring about change in a corporation – using cooperative approaches. Similarly, the study found that male CEOs were regarded more highly when they used dominant or assertive stances, and less highly when they were communal.
“I think one of the most eye-opening aspects of the study was that both male and female leaders were evaluated negatively when their behavior deviated from investors’ gender-based expectations,” said Kristina M. Rennekamp , professor of accounting. “This suggests that investors’ evaluations weren’t based on whether they believed that cooperating or not was the overall right approach to activists, but rather the perceived ‘right approach’ varied based on the gender of the firm’s leader.”
Rennekamp is co-author of “ CEO Gender and Responses to Shareholder Activism ,” published in Contemporary Accounting Research.
Shareholder activism has become a powerful force, with activist hedge funds managing more than $200 billion in assets worldwide. Between 2017 and 2020, they initiated more than 2,800 campaigns – efforts to mobilize investors to force their agenda – and a large portion ended in success or settlement, according to an activist investor report .
The first experiment’s results surprised the researchers, Rennekamp said. Female CEOs using uncooperative responses were viewed less positively than those using cooperative approaches, which are stereotypically associated with women. Male CEOs employing cooperative strategies were perceived less favorably than those adopting “agentic” – dominant or assertive – stances, which are stereotypically associated with men.
The researchers conducted interviews with six CEOs and CFOs, and found that executives are acutely aware of potential investor biases and the importance of messaging when responding to activism.
“Our research has far-reaching implications for corporate governance and shareholder relations,” Rennekamp said. “It suggests that the higher likelihood of female CEOs cooperating with activists may not stem from inherent differences in management styles. Instead, it could be a strategic response to anticipated investor reactions based on gender stereotypes.”
The study also offers a potential explanation for the observed phenomenon of female CEOs being more frequently targeted by activist shareholders. Rather than reflecting inherent gender biases or differences in management styles, this trend could be driven by the anticipation of more cooperative responses from female leaders – a strategy adopted to avoid negative investor reactions.
For additional information, see this Cornell Chronicle story .
Cornell University has dedicated television and audio studios available for media interviews.
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Contemporary Accounting Research
People
CEO gender and responses to shareholder activism
11-Sep-2024