The Advantage of Female Executives

Of the top 500 pub­lic US com­pan­ies, firms with women in seni­or man­age­ment per­formed 18 to 69 per­cent bet­ter in terms of prof­it­ab­il­ity than the medi­an com­pan­ies in their indus­tries. Not only this, but these firms, with around three women in top jobs, scored high­er on top meas­ures of organ­isa­tion­al excel­lence by at least 40 per­cent.

How­ever, as Robin Han­son notes over at Over­com­ing Bias:

[A]nyone who believed this res­ult should expect to make big profits just by buy­ing female firms and selling male firms.

If many stock spec­u­lat­ors believed [this], firm stock prices would jump upon hir­ing more female execs, mak­ing most CEOS quite eager to hire more women execs.  There would be a boom in female exec­s […]  Since that didn’t hap­pen, I’ve gotta believe most spec­u­lat­ors don’t believe those stud­ies.

A couple of thoughts:

  • For a start, this research was con­duc­ted on For­tune 500 com­pan­ies. Not exactly a diverse, or even large, sample to find such cor­rel­a­tions in.
  • Such research does­n’t say that female traits (or the lack of male traits) are con­du­cive to suc­cess, but that diversity is key.
  • A firm lib­er­al enough to have women in seni­or man­age­ment (and rightly so) is likely to be open to many oth­er oppor­tun­it­ies than a con­ser­vat­ive firm.

1 thought on “The Advantage of Female Executives

  1. Paul

    Cor­rel­a­tion vs. caus­a­tion I reck­on.

    I think I’ve men­tioned Mrs Thatch­er­’s epi­thet in com­ments here on why gradu­ates should be made to pay uni­ver­sity fees “Uni­ver­sity gradu­ates earn sig­ni­fic­antly more over their life­times than non-gradu­ates”

    Which con­veni­ently misses the point that smart people tend to go to uni­ver­sity and smart people tend to earn more money – delib­er­ately con­fus­ing caus­a­tion and cor­rel­a­tion.

    Hence that last bul­let point is a very reas­on­able explan­a­tion I reck­on.

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