Investors tend to evaluate CEOs more favorably when their responses to shareholder activism align with traditional gender stereotypes, according to new research from Cornell University. The study found that female CEOs were viewed more positively when they took a cooperative approach, while male CEOs were rated higher when they adopted dominant or assertive strategies. In both cases, CEOs were penalized when their behavior diverged from these gendered expectations.
One of the key insights from the research is that investors’ judgments are not based on the effectiveness of the CEOs’ responses to shareholder activism—efforts by investors, often hedge funds, to influence corporate change—but on whether those responses fit gender-based assumptions about leadership.
A major force
Shareholder activism, where investors seek to influence corporate decisions, has become a major force in corporate governance. Activist hedge funds now manage over $200 billion globally and initiated more than 2,800 campaigns between 2017 and 2020. In this context, the study’s findings carry significant weight for how executives, particularly female leaders, are perceived when responding to such pressures.
The researchers were surprised by the first experiment’s results: Female CEOs who took a more confrontational stance were rated less favorably than those who responded cooperatively, reinforcing the stereotype that women should be communal. By contrast, male CEOs adopting cooperative strategies were viewed less favorably than those using assertive tactics, reflecting traditional expectations for men in leadership.
A second experiment, focusing on female CEOs, offered some nuance. When female CEOs provided a communal explanation for an uncooperative response—framing their decision as caring for investors rather than acting out of self-interest—investors responded more positively than when an assertive explanation was given.
Aware of biases
Interviews with six corporate leaders revealed that executives are keenly aware of these investor biases and the importance of how they communicate their responses to shareholder activism. The research suggests that female CEOs’ higher tendency to cooperate may not reflect inherent management styles but rather a strategic adjustment to anticipated investor reactions.
The findings also underscore the importance of communication in shaping investor perceptions. For female CEOs, crafting careful explanations for their decisions—especially when they take a more confrontational approach—can help mitigate negative investor reactions. This has practical implications for navigating the often fraught dynamics of shareholder activism, particularly for female leaders.
Additionally, the study offers a possible explanation for why female CEOs are more frequently targeted by activist shareholders. The anticipation of a more cooperative response from female leaders, rather than gender biases alone, may be driving this trend.
The research sheds light on the subtle but significant role of gender stereotypes in corporate governance. For female CEOs, providing communal justifications for their decisions may help them maintain positive investor relations, even when their actions defy gendered expectations.
“As the corporate governance landscape evolves, recognizing and addressing these biases will be crucial for ensuring fair and effective business practices,” the researchers conclude. Their findings not only deepen our understanding of gender dynamics in shareholder activism but also offer practical strategies for corporate leaders navigating these complex waters.
