You Don’t Think Like I Do: Why Activist Investors Target Female CEOs

As an advocate for women in leadership, I’ve observed a disturbing trend: the targeting of companies with female CEOs by activist investors. In 2015, DuPont CEO Ellen Kullman “retired” after a six- month battle with such an activist investor. Now there are fresh headlines about more women stepping down from the CEO role (and there are only 27, for Pete’s sake), amidst the same pressures. Sheri McCoy is abandoning her role as Avon’s CEO; Irene Rosenfeld, CEO of Nabisco and Cadbury brand owner Mondelez International announced her retirement; and, Marissa Mayer, chief executive of Yahoo resigned in June. Other large companies with women at the helm: PepsiCo, HP and GM, have also been targeted by activist investors but Indra Nooyi, Meg Whitman and Mary Barra have weathered the storm and remain in their CEO roles.

There is evidence that female chief executives are more likely to be the target of activist investors. Christine Shropshire, an associate professor of management at Arizona State, found that when controlling for other reasons that investors target companies, there is significant more activism toward female CEOs. “All else held equal, female CEOs have a 27% likelihood of facing activism, while their male counterparts have a near zero predicted likelihood of being targeted.”

Why does this happen?

When companies are in trouble, women are more likely than men to be promoted to the top job. Alison Cook and Christy Glass of Utah State University studied all 50 of the women CEOs of Fortune 500 companies through 2014. They found that 42% were appointed during times of crisis, compared with 22% of a matched sample of men in the same period.

This has been referred to as the “glass cliff.” Explained as “ think crisis-think female,” it suggests that people believe that stereotypical feminine qualities, like being collaborative, inclusive and nurturing are especially important for handling a troubled organization. My own research confirms that women possess qualities that make them great managers of change. They use the “soft power” of influence fluently; they inspire commitment, creating emotional bonds with and among the people they lead; and, they delegate in a way such that people take ownership of the initiative and feel in control. Connecting to people, connecting others, and inclusion offset the isolating feelings associated with changing direction and venturing into the great unknown.

It may simply be a case then of right place at the wrong time. Women are often put at the helm of a boat in a crisis, and these are the boats that are more likely to be targeted by the Jack Sparrows of the investment world.

But there is a more subtle dynamic at work. Researchers find that men tend to focus deeply and narrowly on a single perception or task, while women’s attention tends to take in a broadspectrum. Men will focus on the numbers; women will focus on the broader contextual data. In conjunction with this, men tend to be more focused on a shorter-term gain, women on a longer-term gain.

The activist investors, who are predominantly male, are often pushing a CEO to change strategic direction. They are looking for increased shareholder value and that often is measured on a quarter-by-quarter basis. Their desired change to the strategic direction is framed to achieve a quick win. This sets up a push and pull between women leaders and investors, and guess who lets go first.

There is yet another push and pull between leader and investor, and it involves risk-taking. Researchers from the USC have shown that under stress, men have a tendency to take more risks while women have a tendency to take less. So under the stress of battling for strategic control, the activist investor is more likely to take risks than the female CEO. Not only that but other research shows men and women tend to weigh risk differently. Men put a stronger emphasis on the possible pay off, while women put more emphasis on the impact it will have on people involved. Being an outsider, the activist investor is even less likely to consider the people side of the equation; while the woman, as an insider leading her company, is even more likely to focus on the impact of her decision on her people’s engagement and well-being.

Companies need the complement of “thinking female” and “thinking male,” looking contextually and longer term while also focusing on the immediate details; and, taking into account people’s engagement while also heeding the financial implications. The battles between the male activist investor and the female CEO highlight the need to balance these competing ways of thinking.

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