The Effects of Gender and Performance Attributions on CEO s Tenure Corina Ficano Heavener School of Business University of Florida Summer 2013 Honors Thesis
2 TABLE OF CONTENT .. 4 Theory and Hypothesis ... 12 20 Reference 22
3 ABSTRACT This study analyzes the effects of CEO gender and performance attributions, including media favorabili CEO tenure. Many researches show how difficult have been for women to advance in their professional careers. Glass ceiling has becomes an obstacle for many. However, women have never stopped fighting to reach the top. Nowadays, it is very common to see women in managerial positi on s and in some rare cases becoming CEO, especially of a company that it is not struggling to maintain profits. Also, analyst s and the media may become either an obstacle or an opportunity for many women to not only reach the top, but also to stay at the top f or a long time The purpose of this thesis is to serve as start point to further research, help society to be aware of the limitation s many female CEO may encounter in their professional careers, and t he e ffects on their company.
4 INTRODUCTION In the last decade s women have change their status from stay h ome women who take care of t he i r children and t he i r husband s to women who are well educated, with personal and purchasing decisions, and with ambitions to own a business or be wor king at one in the same positions as men. Now, women not only aspired, but are able to accomplish what they want. According to the latest U.S. Census, women represent 59.3% of the workforce, an increase from 43% in 1970 ( Ballaro & 2013). This demo nstrates that w omen have advance quite rapidly in their careers However, even though more women are educated and in the workforce the number of female CEOs still remains low especially in large corporations, compared with the number of male CEOs The number of women in middle management positions is growing ( Oakley 2000). As oppose to the general believe, women and men have equal ambitions and equal aspirations to reach the top corporate jobs, including women with children. Researchers have found th at women and men have similar advancement strategies like exceeding performance expectations, successfully managing others, seeking high visibility assignments, and demonstrating expertise and they also have experienced similar barriers like lack of signi ficant general management or line experience, and lack of awareness of organizational politics during their way to their desire positions Moreover, women have report that they have also experienced cultural barrier that men do not experience such as gende r based stereotypes, exclusion from informal networks, lack of role models, and an inhospitable corporate culture. Also even though women and men face difficulties balancing their work and personal life women make more
5 trade offs in order to balance it, but at the same time, they present more levels of career satisfaction (Catalyst, 2004) Evidenced in many of the different publications like New York Times, Wall Street Journal, BusinessWeek, and Fast Company, women in the United States have the combinations of skills needed to be a superior leader and yield outstanding effectiveness in what they would do at the top of a company; however, it is also evidenced that they, most of the times, come in second when competing against men for leadership positions ( Eagly 2007). One of the l eadership styles that have been proven to be highly effective in many contemporary organizations is the transformational leadership. This type of leadership encourages creativity and innovation, but more importantly, it nurtures strong interpersonal connections based on the thei r consideration of others; resulting in high performance for part of the employees based on their motivation to exceed expectations. female behaviors. Nevertheless, rese archers found that females surpass men when it comes to attention to their human relationships and women have a more effective reward based approach while men practice the threat based approach. This evidence showed that women are more transformational lea ders than men (Eagly, 2013). With this researches, the question on why men have more opportunities to get to the top of the organizations remains Even though the probabilities and society are not in favor of women in management positions, there have bee n some women that have risen to the top even with the odds against them, demonstrating that it can be done and giving hope to other women who have the same
6 aspirations. However, a woman getting to top level of an organization is just the first step. It is hard to get to the top, but it is as hard, or even harder, stay there. In this paper, we examine whether female CEOs experience shorter tenure in general than men CEOs. Also, we explore whether performance attributions such as media press favorability and officer gender and their time of their tenure.
7 THEORY AND HYPOTHESIS We are goi ng to be looking at some of the challenges female CEOs face. CEO gender an d tenure According to Motif Investing there were 18 women CEOs of Fortune 500 companies, up to January 2012, that is 17 more female CEOs than what we had 15 years ago. The number of female CEOs is small but incre menting more and more every year The problem once they are on the top is their staying power. In the United States, research suggests that women retain their position as CEO for approximately 4.8 years, while men tend to stay as CEO for approximately 8.2 years, almost twice as long as women ( Blanton, 2005) O ne example is Mattel Inc. CEO, Jill Barad, who served a three years term from 1997 to 2000. Ms. Barad was not only one of four women who head Fortune 500 Company at the time but also the women who made Barbie dolls selling toy transforming the 1950 doll into a famous millennium doll However, when quarters start ed to show disappointing results and losses became a problem, Ms. Barad became the target of others scrutiny, and was pressured to resign. Because of the many researches done, it is evident that women that want to ad vance in their careers faced what it is called the glass ceiling, which is a discriminatory barrier that hinder women from rising to the top and with that the progress, power, and promotions. At the same time, men tend to bene fit from the glass escalator; when it comes to men working in female dominated professions, they do not experience the same barrier that women faced. This is evidence that m en rise faster in female dominated professions than wome n in male dominated professions. However, now that more women are breaking th rough th e glass ceiling and more women are getting faster into leadership positions, they face what is called the glass cliff where
8 it is more possible for women to occupy positi ons that are precarious and with higher risk of failure (Ryan & Haslam, 2005) Glass cliff is a term created a fter a study made by Ryan and Haslam where they observed and analyzed the appointments of to t he boards of FTSE 100 companies, where the results showed that women are over represented on boards of poorly performing companies. Moreover, women are facing one more challenge; there is another concept called the saviour effect which predicts that women will be given less of an opportunity to prove thei r leadership capabilities compared to men, and that lean towards significantly shorter tenures and a replacement by a man, who will be perceived as a the person who will save the company from poor leadership. ( Cook & Glass, 2013) This last concept of the savior effect takes us to a British study that compared men and women appointed during 2004 as either CEO or board members by the companies that make up London's FTSE 100 stock index. The study found that more women agree to head up troubled companies than their male counterparts. The companies that were studied presented a declining stock price in the previous five months (Blanton, 2005) omen are more open to take risks and accept the CEO position in companies that have trouble and need a turnaround because of the small number of opportunities that are available for women in top leadership positions as CEO. Also, many woman want to prove t hat they are as capable as men to manage a company, and that the difference should not be made. Because men will be perceived as saviors, scrutiny towards the leadership of woman will increase and the confidence of stakeholder can decrease. Perception s of male and female executive s are also important to consider. Historically, men have been described as competitive, independent, rational, ambitious, logical, and
9 aggressive w hereas women have been described as sensitive, emotional dependent and illogical Moreover, even though communication and passion is important for a leader in a top positions objective, driven, and assertive, male characteristics are view are viewed as standard traits for executives. This indicates the preference in male traits for managerial positions and that men have the attributes necessaries to achieve tasks (Dennis & Kunkel, 2004). Also, manager positions were viewed as more male position, and although these perceptions have been changing over de last decades, it is a very slow process. Thes e leads to my fist hypothesis, after controlling for firm performance, gender predic ts CEO tenure, such that female CEOs will serve shorter periods as CEO than men CEO performance attributions and tenure As many r esearches ha d shown, CEO tenure is shorter in those firms that have poor performance results, but does the reputation of the CEO plays a role in shorter tenure? According to The Merriam Webster Dictionary reputation is define d recognition by other people of some In this definition we can find two major aspects, recognition or perception and characteristic or ability, these are reasons why CEOs became well known CEOs become known for others either because they have an ability to do some thing which will increase the performance of the company, or because CEOs are widely exposed to the media favorability (Lee, 2006). We will focus on the recognition of CEOs based on media favorability and how that affects CEOs tenure specifically in femal es. Based on the increase of press released in the recent years about female leader taking over more companies, it is evidently that female executives are being watched and follow by
10 stakeholders. As CEOs create their reputation with the media, they also c reate a strong connection between them and their companies, connection that will later affect them either positive or negative. It will become harder for stakeholders to separate the CEO from the company when evaluating performance (Lee, 2006). For example, Carleton Carly Fiorina became Hewlett Packard CEO in 1999 and with that position she also became t he first woman to run a Fortune 20 company Since that moment, Ms. Fiorina became to develop her reputation and the media begin to follow her. Stak eholders had big expectative for her. At the beginning, she was portrayed by many sources like The Wall Street Journal and Forbes as a good candidate to revamp H P image. Also, few months after she was named CEO, H P stock was raising, and hit a record of $114 a share. However, by the end of her time as CEO in Hewlett Packard Ms. Fiorina was accused of not seeking and not taking advice of the former CEO, and for pushing for too much change too fast She became one with the company, and even though Ms. Fiorina worked hard and gave everything to turn the company around, she was forced out by the company board after her buying of the company Compaq A female CEO is not as commo n as many would wish, so, as many other novel events, it makes the media put its attention on it, and it can make other stakeholders skeptical about the change. Researches showed that news about the promotion of a female to the CEO position portrays inform ation that emphasizes gender related terms, while news about appointments of male CEOs have a tendency to be neutral towards gender, and are more focus on the nature of the job (Lee & James, 2007).
11 Analysts and media, among other business influential are looking for results and fast. They are giving CEOs about five poor earnings before their position are in a critical position. Nevertheless, for a new CEO, 15 months is not enough time to master their positions ( Gaines Ross 2002) More time is needed to connect with their teammates and employees, develop and put on practice strategies, and especially to change practices and turnaround a company. This leads to my second hypothesis, p erformance attributions will partially mediate the relationship betwee n gender and CEO tenure performance attributions being media press favorability and analyst ratings. Model 1 Model 1 represents graphically what I am trying to achieve in this study. Tenure Performance Attributions Gender Firm Performance
12 METHODS AND RESULTS Data Collection To examine the hypothese s, the collection of data is an important step. I searched and selected 17 female CEOs and 15 male CEOs that took over their companies during the past 20 years. Doing this, I tried to collect data for male s and female s that matched t he industries and dates of becoming CEO. M edia ratings for both female and male CEOs was evaluated by a content analysis of some of the most recognized newspapers and magazines in the business world including New York Times, Wall Street Journal, Washington Post, Boston Globe, Los Angeles Times, Chicago Tribune, Atlanta Constitution, San Francisco Chronicle, and San Jose Mercury News, for the newspapers and BusinessWeek and Forbes for the magazines Out of the many articles, I evaluated only those that included evaluative com men ts about the CEO s. Each article was rated on a scale from 2 to 2 points. 2 points given to a mostly negative article about the CEO, 1 point for a generally negative with some positive comments 1 point for a generally positive article with some negative comments and 2 points for a very favorable article. F inally, 0 points were assigned t o those CEOs which not evaluative articles found. The final media rating was calculated as the sum of the ratings of the articles found. In order to collect the average that analysts gave to the companies one month before the CEO took his/her position (@1M_Prior), the exact month the CEO took his/her position, which demonstrate the immediate reaction of the analysts (I mmediate), and one year after the CEO took his/her position (@1Y). Th ese data will provide us with s on their expectation on the new CEO, and whether the company is worth
13 buying, selling, or holding, which will also provide us with an idea of who the new CEO is doing after a year. Lastly, the firm performance data was collected. For this, four measures were taken into account, Total Shareholders Return (TSR), Return on Assets (ROA), Number of Employees (EMP), and Total Assets (TA). Each of these measures were collected twice, one for the company one month before the new CE O took over the company, and the other two years after the CEO took over the company.
14 Analysis of the results Table 1 provides the correlations for all the variables These correlations are provided as initial support or rejection of the hypothese s One of the main independent variable, gender had a very low correlation with the other variables. There is no preliminar y support for any correlations Table 1
15 Table 2 represents the initial model that I was trying to achieve with this study where I wanted to predict the tenure of the CEO based on gender firm performance, and a performance attribution, media rating. As Table 2 shows, the model is not significant, the variable s do not predict the tenure. Table 2 Coefficients a Model Unstandardized Coefficients Standardized Coefficients T Sig. B Std. Error Beta 1 (Constant) 7.337 1.105 6.639 .000 Female 1.159 1.234 .185 .939 .357 ROA02 6.426 7.080 .192 .908 .373 TSR02 1.136 .916 .257 1.241 .227 Media_rating .234 .204 .226 1.143 .264 a. Dependent Variable: Tenure Table 3 shows a significant positive relation between gender, being a female CEO and media ratings. Female CEOs get higher media ratings after controlling for firm performance. However, the firm performance measures within the first 2 years of t not predict media ratings. The main takeaway of this table is that positive press does not translate into good performance.
16 Table 3 Coefficients a Model Unstandardized Coefficients Standardized Coefficients T Sig. B Std. Error Beta 1 (Constant) 1.104 1.059 1.043 .307 Female 2.300 1.116 .380 2.060 .050 ROA02 7.841 6.748 .241 1.162 .256 TSR02 .665 .886 .155 .751 .460 a. Dependent Variable: Media_rating Table 4 shows that the only significant variable is the initial return on assets. Initial r eturn on a ssets is the biggest predictor in the change of return on assets. This relationship is negative, indicating that the return on assets before the new CEO was appointed were not as good as the ones after the CEO took the position. Table 4
17 Table 5 shows that initial return on assets is the biggest predictor of changes in the n umber of employees. The relation is positive, so as the company growth its assets, it can need and hold more employees. Moreover, there is a marginally significant negative relationship between gender, female CEOs, and the change in the number of employees After controlling for the media rat other performance variables, companies with female CEO tend to reduce the number of employees. Table 5 Table 6 shows two significant relationships First, there is a negative relationship between the initial total shareholders return and the change in total shareholders return. The tot al shareholders return increased after the new CEO was appointed. The second relationship is also a negative relationship between the initial return on asset s and the change in the total shareholders return.
18 Table 6 Table 7 shows some significant relationships Initial return on assets is the biggest predictor of total assets change; the relationship is positive, meaning that as return on assets reactions positively predict changes on total as sets. If the reactions of analyst at the time of the appointment of the CEO are positive, then the total assets of the company will increase. M oreover, there is a nega tive relation bet ween gender, female CEO, and change on total assets. There is a reductio n of total assets in companies with an appointed female CEO. Finally, there is a marginally significant negative the change on total assets. This demonstrates tha t the total assets decrease because of the rating before the CEO is appointed.
19 Table 7 Considering these statistical figures, neither of the two hypotheses was supported.
20 CONCLUSION This study have as a purpose to examine many variables like, gender of CEOs, firm performance, and performance attribution like media ratings and analysts ratings, as predictor s of the CEO tenure. Even though many other studies have shown that tenure for female CEOs is shorter than male CEOs the small correlations rejected the first hypothesis. Also the correlations rejected the second hypothesis, so for the purpose of this study performance attributions will not partially mediate the relationship between gender and CE O tenure. Even though the hypotheses were not supported, we find some interesting relations that can help us understand companies a little more It was demonstrated that female CEOs receive more attention from the media than male CEOs especially positive attention This may translate into expectations. The number of female CEOs is been increasing over the past couple of decades, but it is still rare for many that women are running companies. A p art of the women population want other women to be successful to achieve their goals even when it is not the usual way because it gave hopes to other women to achieve their own goal, and it shows equality between female and male When a man assumes a CEO position, the media does not give as much attention to the pe rsonality and achievements of the person because males assuming these positions are very common. Also, this study shows that when a company has a female CEO, there is a reduction on the number of employees and the return on assets, but the total shareh olders return remains unaffected. These results may indicate that the productivity of the company is increasing since the company is working with fewer inputs, but the outcome is the same.
21 There are some limitations presents on this study. The limitati ons are the amount of data the sources, and the time frame of the data. By increasing the sample size, more female and male CEOs, the standard errors would decrease, and the data would be more accurate as we get closer to the actual population. Moreover, the media favorability was one of the reasons why the sample size is so small. In order to increase this sample, more sources can be search, like other newspaper, online articles, international newspaper and magazines, and more. Finally, the time frame tha t was analyzed could be increase d There are many female CEOs that have taken ove r companies recently, for which there is not enough media or analyst rating right now, so in order to look for the information of one or two years, it may be favorable to review this study in a couple of years. I believe that with further study these hypotheses can be proven, and make a significant difference in the field of business
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