Bring on the girls

Bring on the girls

5 Nov 2013

A few weeks ago, I listened to Carolyn McCall, CEO of Easyjet, choosing her Desert Island Discs on Radio 4. After her first 18 months in the job, the shares have taken off, soared and flown since the start of last year (+187% as I write). I found myself thinking that she had timed that career move perfectly – there has been a tremendous cyclical recovery in many airline stocks. Then I wondered if I was being a little harsh. We will never know, obviously, but would things have gone so well if Mr Buggins in a suit and tie had been appointed instead?

Then a week ago a friend e-mailed me to ask what I think of Mitie shares and I replied: “I’m ok with Mitie. It’s run by women”.

He thought I was being humorous and in a way he was right. It was a true but unserious answer. Yet it had emerged from my sub-conscious and caused me to wonder whether I might prefer companies with female executives. (Mitie is a stand-out as both the CEO and CFO are women).

I have as many unsubstantiated and uninteresting views on the different qualities of the sexes as anyone but I do not make investments on the basis of generalisations like that. I want to see some statistics. So I went looking for some.

First, some background about where we are, in the UK, on this topic. Girls are now outperforming boys academically and I read a comment piece the other day saying effectively that we should now be more worried about the fate of our young men. Be that as it may, it is widely recognised that the scarcity of women at board level is egregious. Many people would say that it is unfair and proof of discrimination. I would say that it is prima facie evidence of a damaging waste of talent that, as an investor, might well be costing me money.

In February 2011, the government published a document entitled “Women on Boards”. Britain is the only country that could commission a report on “diversity” from a white chap known as Lord Davies of Abersoch CBE but this quote from his executive summary seems quite logical:

“When women are so under-represented on corporate boards, companies are missing out, as they are unable to draw from the widest possible range of talent.”

His main conclusion is that:

“FTSE 100 boards should aim for a minimum of 25% female representation by 2015 and we expect that many will achieve a higher figure“.

This is from a starting point of 12.5% in 2010.

This sounds all very well but in my view it misses the point. Lord Davies is referring to company boards in the wider sense, including non-executive directors. There is little easier for a large company to issue a diversity statement and bung a respectable lady onto the list of non-execs where she will gratefully add another £25,000 a year to what is frequently a portfolio of such interests. I think that the “Women on Boards” report lets male-dominated company managements off the hook.

Ideally, it should not be up to the government to address this. Shareholders should be demanding the best management available.

I have analysed the executive boards of the FTSE 250 companies. I chose this group rather than the larger FTSE 100 companies because I am not convinced how much difference a single manager can make to a huge company. Is the success of BP (to take an example at random) dependent on the man or woman at the top? I doubt it.

Warren Buffet has famously said:

“You should invest in a business that even a fool can run, because someday a fool will”.

The fates of FTSE 250 companies are quite likely to be strongly influenced by the quality of the managers. I have written elsewhere how annoyed I was to read the CEO of Taylor Wimpey claiming that no one could have forecast the property melt down in 2008. Of course I am not saying that a woman would have done better but I am saying than someone could have done better.

Excluding listed investment trusts, which are nameplate operations and whose directors are usually all non-execs (often resident in Guernsey), the FTSE 250 shares include 206 “real” companies. According to my analysis, these employ the services of 556 male and 28 female executives. That’s 95.2% to the guys and 4.8% to the gals.

Here is my main question. As an investor, can I really believe that the best managers are being employed? Is there any evidence that the pool of male talent is 19 times richer than that of the female?

I looked at the average share price performance this year for all the 206 with the intention of seeing if companies with a female executive board member have done better. The sample is larger than you might expect because the 28 women are spread across 27 companies i.e. 13% of the 206.

Here they are.

Company Name Position
3i Julia Wilson CFO
Ashstead Suzanne Wood CFO
Cairn Jann Brown CFO
Dechra Anne-Francoise Nesmes CFO
ENRC Zaure Zaurbekova CFO
Lancashire Holdings Elaine Whelan CFO
J Menzies Paula Bell CFO
Ophir Lisa Mitchell CFO
Redrow Barbara Richmond CFO
Rightmove Robyn Perriss CFO
Ultra Electronics Mary Waldner CFO
BTG Louise Makin CEO
N Brown Angela Spindler CEO
Drax Dorothy Thompson CEO
Mitie Ruby McGregor-Smith CEO Suzanne Baxter CFO
SVG Capital Lynn Fordham CEO
Alliance Trust Katherine Garrett-Cox CEO
TalkTalk Dido Harding CEO
Thomas Cook Harriet Green CEO
Wetherspoon Su Cacioppo Dir
Chemring Sarah Ellard Dir
Close Bros Elizabeth Lee Dir
Dixons Katie Bickerstaffe Dir
Fenner Vanda Murray Dir
Go-Ahead Group Katherine Innes Ker Dir
Invensys Victoria Hull Dir
SuperGroup Susanne Given Dir


From 31 December 2012 to 31 October 2013 the FTSE 250 rose by 25.2%, a pretty phenomenal return. Yet the average share price increase for the 27 companies was 35%. There are always caveats when statistics are quoted. For instance, the FTSE 250 is weighted according to market capitalisation whereas my numbers are not. So a smaller company whose share price does very well (or badly) will have an extra-exaggerated influence on the results.

This is not a mathematically rigorous exercise. There again, in performance terms, +35% is dramatically better than +25%. A fund manager who achieved that would be hailed as a superstar.

Financial commentators invariably talk as if share price movements can be explained. The truth is that, insolvency and takeover aside, these explanations are just guesses. When I was a blue button running messages around the old London Stock Market, any request to know why a share price was rising was met with the answer “more buyers than sellers, son”. At first I thought that the information was being withheld on a ‘need to know’ basis but I soon realised that these men (99.9%)had learnt that it was much quicker and cheaper not to try to match news with price moves. The key to prosperity was to develop an instinct for whether there were indeed more buyers than sellers.

So I am not going to say that this limited correlation between female executives and share outperformance is proof of a causal link. What I will say is that it is a small piece of evidence supporting my view that the 87% of these companies with no female executives might do better to widen their search for management talent and that investors should put this to companies with large, exclusively male boards. As we know, closed groups of any kind tend to suffer from mutual confirmation bias. Take a look at the 2007 executive board of RBS that pushed through the insane purchase of ABN Amro – misters were doing it for themselves.

I am not advocating investing in companies purely on the grounds that there is a female executive but I would certainly weigh it as a positive factor.

Leave a Reply