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Why Your Next CEO Should Be a Woman

business.com editorial staff
business.com editorial staff

According to a study of Fortune 1000 companies, women-led businesses earned investors a 340% return.

  • Only 5% of all Fortune 500 CEOs are female. For all businesses with more than 100 employees, an estimated 17% are female.
  • Corporations such as IBM, Pepsi and Kraft Foods are led by women.
  • Women-led CEOs have been associated with a 340% investment return.

Carly Fiorina and Meg Whitman are both in the news of late, for different reasons. Both are former CEOs of what used to be Hewlett-Packard before it broke into two separate companies. Both are also female, which in a better world wouldn't be worth mentioning.

That better world would be one unlike ours, in which the percentage of female CEOs in Fortune 500 companies is only 5% (a running total of 24 women), even though women make up 45% of the S&P 500 labor force, according to The Washington Post.

If we look at companies with more than 100 employees or more than $50 million in revenue, the percentage is only marginally better – only 17%, according to a study conducted by Mintage. But the same study found that these female CEOs headed up companies with up to 18% higher revenue per employee compared to male-led companies.

In general, female-led companies shared the following characteristics compared to their male counterparts:

  • More robust marketing teams
  • Higher levels of publicity
  • Stronger event planning
  • Greater online presence

Moreover, studies such as those conducted by MIT and cited in The Huffington Post point to women's superior emotional intelligence – the ability to "read" a situation by correctly assessing other peoples' emotions – that results in better outcomes and higher performance.

And according to Business Reporter, women are better collaborators, which in part explains why organizations that have a larger proportion of women in higher roles outperform organizations that don't.

Why aren’t there more female CEOs?

Despite the rising numbers of women in the workforce, at the higher echelons, it's still very much an old boys club. As reported in The Guardian, despite some gains, company boards are still made up mostly of men. Moreover, men tend to view women more critically, which is one reason why women in top positions are forced out faster than men when a company is in crisis. Or, perhaps more significantly, when women challenge the male hierarchy.

Sharon Bolton, a professor of organizational analysis at the University of Stirling in Scotland, notes that women managers are primarily in roles that require people skills – human resources, public relations, and communications, for example. But C-suite executives are typically drawn from the male-dominated disciplines of finance, research, operations and general management. Put another way, women are victims of "institutionalized exclusion."

Successful female CEOs

Irene Rosenfeld is another example of an extremely successful female CEO, according to the Financial Times. As the chairwoman and CEO of Kraft Foods, she is in charge of the world’s second-largest food and beverage company. With an annual compensation in excess of $19.3 million, she has led Kraft foods to dominate the international marketplace.

Indra Nooyi, according to Fortune 500 lists, was named CEO of Pepsi after only working for the company for seven short years. Since she became CEO in 2001, she has acquired major companies for Pepsi, including Tropicana and Quaker Oats. Her estimated compensation is upwards of $16.2 million each year.

Virginia Rometty is a notable CEO because she dominates in the male-centric tech industry. As the CEO of IBM, as reported on the tech industry website, since 2011, she has been responsible for the company earning more than $100 billion. 

Why your next CEO should be a woman

While gender shouldn't be a primary reason to hire (or not hire) anyone (for legal and moral reasons), a case could be made that all other things being equal, a female CEO could pay off for your company. Literally.

Quartz reports on an algorithm developed by Karen Rubin that correlates female leadership to stock performance of Fortune 1000 companies in the period from 2002 to 2014.

Her findings: Women-led companies earned investors a 340% return, compared to an S&P 500 benchmark of 122%.

You might have even more reason to hire a female CEO if your company is having problems. Research suggests that women are more likely to be picked for leadership roles to run distressed businesses. Women are thought to have a better personality to manage a crisis because they are seen as more intuitive, understanding, and empathetic than men.

Also, women are viewed as better able to manage people and situations during a time of stress. During particularly turbulent times at their respective companies, Yahoo appointed Marissa Mayer, and GM appointed Mary Barra, who continues to lead the automobile manufacturer today. 

The downside for women is what is characterized as "the glass cliff," a phenomenon in which female CEOs are typically fired faster than men for not achieving the desired results. Shirley Leung of The Boston Globe points out the higher percentage of female CEOS (38%) forced out compared to men (27%) in a 2013 study of 2,500 public companies. This also tends to, as Marianne Cooper notes for PBSNewsHour, "reaffirms beliefs that women aren't good leaders anyway."

Image Credit: monkeybusinessimages / Getty Images
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