The authors note shareholder activism is increasing in American financial markets, and managers tend to view activists as “bullies” who demand company changes and publicly express dissatisfaction with management. Although activism often involves a big investor telling the CEO what changes to make, multiple investors can simultaneously target the company in what is known as a wolf-pack attack.
To determine if a CEO’s gender influenced whether their company would be the target of activist investors, the study authors looked at data from 3,026 large U.S. firms between 1996 and 2013. Then, they identified activist investor activity by examining records from the Securities and Exchange Commission. To account for differences other than gender that might affect activists’ decisions, the authors controlled for variables including firm size, profitability, leverage, dividend yield and industry competition.
Here are five takeaways from the report.
1. The study found companies with male CEOs were targeted by an activist 6 percent of the time during the study period, compared to 9.4 percent for companies with female CEOs.
2. Female CEOs (1.6 percent) experience slightly more wolf-pack attacks than male CEOs (1 percent).
3. Although the differences appear small, the authors note companies led by female CEOs were 50 percent more likely to be targeted by activists and around 60 percent more likely to be targeted by multiple activists.
4. “The fact that female CEOs are targeted more than male CEOs is troubling, as it may perpetuate negative gender stereotypes of female executives,” the authors wrote. “People perceive activism to be an indicator of how well a firm and its CEO is performing, so greater activism against female CEOs may reinforce the notion that they are not able to manage firms as well as men.”
5. To combat the threat of activist investors, the authors concluded CEOs must give detailed presentations about the strategy and direction of the company, fight proxy battles for board seats and hold meetings with stakeholders to ensure they know management is leading the firm well.
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