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.

Comments are closed.