Female CEOs are scarce, but history shows they can produce huge returns


Female CEOs may be few and far between, making up less than 5 percent of CEOs in the S&P 500, but history shows they’ve been able to generate big returns for investors.

Of the 24 female CEOs in the S&P 500, 13 have led their companies’ stocks to outperform the index in terms of cumulative total returns during their tenures. Some have managed to produce triple- and even quadruple-digit percentage gains.

The average year-to-date return from the 24 female-run companies was over 12 percent as of Friday’s close, according to S&P Global, which has made it a mission to promote gender equality through its Market Intelligence arm and the #ChangePays initiative. For comparison, the average year-to-date return for male-run S&P 500 companies was around 11 percent.

Yet, even with these gains, the combined market cap of S&P 500 companies with female CEOs totals just over $1 trillion, while the same statistic for male-run companies exceeds $24 trillion.

To make matters more complicated for female CEO hopefuls, the percentage of female CEO appointments at S&P 500 companies has actually dropped in the last decade, averaging less than 6 percent in the last four years, according to S&P Global’s Katie Darden, the company’s associate director of financial institutions research.

“What really hit home as I was doing this analysis was just how little data we had to work with,” Darden said in a phone interview, highlighting her never-before-published data set provided exclusively to CNBC. “We were dealing with such small numbers of female CEO announcements. That became kind of the main takeaway to me.”

Analysis based on data compiled May 17, 2018. Source: S&P Capital IQ, an offering of S&P Global Market Intelligence.

The biggest outperformer of female-run S&P 500 companies is health-care-focused real estate investment trust Ventas, which has generated a cumulative total return of 2,559 percent since CEO Debra Cafaro took over in March 1999. The S&P’s cumulative returns for the same period is roughly 215 percent.

Other companies that handily beat the S&P’s performance include Advanced Micro Devices under CEO Lisa Su, with a nearly 427 percent return; Lockheed Martin under Marillyn Hewson, which has returned 293 percent to shareholders; Ulta under Mary Dillon, who has driven returns of nearly 226 percent; and Ross Stores under Barbara Rentler, with 175 percent returns.

Kohl’s CEO Michelle Gass, Anthem CEO Gail Boudreaux, Progressive Group Tricia Griffith, Alliant Energy CEO Patricia Kampling, General Dynamics CEO Phebe Novakovic, American Water Works CEO Susan Story, Arista Networks CEO Jayshree Ullal and Northrop Grumman CEO Kathy Warden have also produced higher cumulative total returns than the S&P.

“We see more companies led by women perform really well,” said Darden, the S&P Global researcher. Still, she hopes that, “at some point, we’ll stop having the conversation of, ‘Do companies do better if they’re led by a man or a woman?'”

“I’m looking forward to seeing more representation not just numerically, but in terms of the industries where these women are leading companies,” she added, noting that in sectors like industrials and materials, female representation is very low or, plainly, “zilch.”

Darden’s research in partnership with Kensho also found that investors tend to balk when companies elevate women to chief executive positions, with underperformance hitting 1.8 percent after three months.

“On the day of the announcement, it seemed that companies announcing new female CEOs actually outperformed somewhat, not by huge amounts, but somewhat, and then lagged a bit,” Darden told CNBC. “But […] once you get about 3 months out, you’re looking at some noticeable underperformance by companies that announced an incoming female CEO.”

While their companies didn’t produce the gains needed to beat the S&P during their tenures, IBM CEO Ginni Rometty and General Motors CEO Mary Barra have made huge impacts on their organizations.

Under Rometty, IBM changed its stripes to fit the new era of technology, doubling down on artificial intelligence with IBM Watson and most recently purchasing cloud computing company Red Hat, setting Big Blue apart from the rest of its rivals.

Barra has helped her massive automaker focus on selling more popular trucks and crossovers, successfully cut costs and brought new focus to GM’s electric car and autonomous vehicle initiatives.

The market might not always have faith in female leaders, but records show investors might need to rethink that calculus.

Not only would encouraging women to join the broader workforce add nearly $6 trillion to the global market cap in 10 years, according to S&P Global, but matching the number of women to the number of men in the workforce could at $12 trillion to the global GDP by 2025, says McKinsey.

But Darden’s still hoping for a day when gender exits the picture entirely.

“Of course we should hire the best people for the job, and the best people for the job can come from anywhere in the company,” she said. “And so I think encouraging women to tackle more challenges within their current careers and in other areas they might not have pursued earlier is a great idea. Obviously, ensuring equal compensation for equal work, but also ensuring that the way we define valuable work is not defined by gender.”

A final thought: The YWCA Impact Shares Women’s Empowerment ETF, which tracks an index of companies around the world with strong policies focused on women’s empowerment and gender equality, is outperforming both the Dow Jones Industrial Average and the S&P 500 this year.

So, for those considering where to put their money, history shows it might be more lucrative to bet on ladies.

All cumulative total returns were calculated via FactSet. Data points provided by S&P Global Market Intelligence, Catalyst and McKinsey & Co.

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