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Company Stock Prices Fall When Women Are Added To Boards Of Directors
Turns out that many companies who seek to embrace equality by any means could actually be doing their shareholders a disservice. But hey, we thought equality of outcome was a guaranteed fast track to utopia! What happened?
In fact, many companies experience stock price declines when women are added to the board of directors, Bloomberg points out.
An analysis of 14 years of market returns across almost 1,900 companies recently revealed that when companies appoint female directors, they experienced two years of stock declines. Companies saw their stock fall by an average of 2.3% just from adding one additional woman to their board.
Kaisa Snellman, an assistant professor of organizational behavior at INSEAD business school and a co-author of the study said: "Shareholders penalize these companies, despite the fact that increased gender diversity doesn't have a material effect on a company's return on assets. Nothing happens to the actual value of the companies. It's just the perceptions that change."
The study suggests that investor biases are to blame. The study asked senior managers with MBAs to read fictional press releases announcing new board members. The statements were identical, but for the gender of the incoming director.Participants said that men were more likely to care about profits and less about social values, while women were deemed to be "softer".
Snellman continued: "If anyone is biased, it is the market. Investors should consider organizations that add women and other under-represented groups to their boards because there's a good chance that company is being undervalued."
Despite this study's findings, other non-academic reports over the years have suggested that diverse leadership results in corporate success. A McKinsey analysis concluded that board diversity correlates with positive financial performance and a 2019 Credit Suisse report noted a "performance premium for board diversity".
These findings have prompted investors like BlackRock to push for diversity on boards. Women now account for more than 25% of board members on the S&P 500 and 20% of boards globally.
(Score: 5, Informative) by Anonymous Coward on Thursday November 28 2019, @08:33PM (13 children)
The beauty of markets is that they're not driven by what they're told, but by self interest. You see apples on the market selling for $10/piece. You know you can grow apples for cheaper. And so you do. You start producing tons of apples and selling them for $2 per piece. The price of apples plummets, you get rich, the market is closer to its "true" value. The "true" value being the cheapest value possible that an apple can be sold for while still providing a profit to its seller.
The price of an apple has nothing to do with what 'the market's controllers tell it to value' - it has everything to do with how cheap you can produce an apple and sell it! Same thing for wages and other aspects of the market. That's the exact reason slavery was so difficult to set aside. Company A is using slaves for labor. Company B isn't. Company A is going to have vastly higher profit margins and be able to grow faster, sell their product cheaper, and just generally crush Company B. Companies using slaves grow and prosper, companies not using slaves wither and die.
Imagine there was any meaningful wage gap. Take the above paragraph and simply replace "slave" with "women" and you get the exact same thing. This wouldn't be a matter of perception or opinion but economic performance. Girly Company A can produce their products for $1000 while Sausage Fest Company B has to charge $1100 for the exact same stuff. Girly company is going to grow, expand, and dominate the competition. Exactly as companies using slaves did. Except we don't see that, at all. And that's because the "wage gap" is a myth. Once you actually normalize for experience, ability, hours worked, etc it completely disappears. The original myth, popularized by Clinton, simply compared the median full-time earnings of women and men. That's where you get the '77 cents on the dollar' number from. It didn't even normalize for hours worked (men work more hours), or even the the same jobs. Calling it a myth is overly polite. It was a lie to drive social anger for the sake of political gain.
(Score: 1, Insightful) by Anonymous Coward on Thursday November 28 2019, @09:10PM
Sure, go ahead and grow some apples, self publish your album or indie code your killer app.
There are reasons startups only exist to get bought out and every artist sells their soul. Whales exist and fuck with the market. The average citizen has a pitiful disposable capital, most of their wealth is goods they use personally such as their car, home (if they're lucky) and electronics.
(Score: 5, Interesting) by PartTimeZombie on Thursday November 28 2019, @09:15PM (4 children)
True. Which is why when you start selling apples for $2, undercutting my $10 apple operation I am going to offer you $10 million to sell me your apple company so that I can continue to own the apple market.
Your point about slaves leaves out the part where you have the expense of feeding, clothing and housing your slaves, when I don't.
I did a quick search on the term "Was slavery economically efficient" and while there is some debate, it seems the general consensus is "no".
Your point about the wage gap is something I would largely agree with though. The company I work for would employ zero men if they could pay women 77 cents on the dollar and get away with it, but they don't.
(Score: 2) by Mer on Thursday November 28 2019, @10:28PM (2 children)
Wait, why wouldn't slavery be economically efficient? You have full time employees, you have to pay them a living wage, whether or not the standards of living their wage can afford is acceptable is another debate but they must afford rent, food and taxes. Without even considering the fact that you can squeeze more hours of a slave than you can out of an employee and that you don't need to spend extra on a slave for recreation after their living needs are fulfilled, you'd be saving because your slaves could be lodged near their place of work in communal housing and eat communal meals.
I'm pretty certain that if slavery is inefficient it's because of the application, not because slavery is inherently a bad idea from the point of view of pure economical efficiency.
And yes, as I write this I realise how much this sounds similar to "true communism has never been tried"
Shut up!, he explained.
(Score: 2) by PartTimeZombie on Thursday November 28 2019, @11:52PM
This is a place to start. [fee.org] The short answer is: It's complicated.
(Score: 3, Informative) by dry on Friday November 29 2019, @03:44AM
You have to invest in slaves generally, there are exceptions such as during a war. when you can capture new slaves to replace the ones you worked to death. Generally though, you have to look after your slaves from birth to death, train them, guard them (both from thieves and the slaves running away), look after them when sick etc. With employees, the government or workers family is responsible for most of that, you hire them already trained, use them up and get rid of them.
(Score: 1, Interesting) by Anonymous Coward on Friday November 29 2019, @06:54AM
I completely agree with you, but I don't think slavery is an exception - but rather quite vivid evidence of this phenomena! There have been abolition movements for thousands of years. Aristotle reference such movements some 2,300 years ago. And throughout the centuries various cultures have banned slavery only for it to gradually eek back into society. What happened that finally made it take hold?
This [ourworldindata.org] graph explains it all and is one aspect most analysts fail to properly consider. For most of our species nearly everybody worked in agriculture. Then around 1800 there started to be a sharp change. That change was the industrial revolution which brought two critical changes: Skyrocketing efficiencies in production efficiency and rapid migration to cities. Cities became sources of cheap, temporary, disposable labor that was far more efficient than slaves. When your slave starts performing poorly? You are under an immense obligation to "fix" that, one way or the other. When your worker starts performing poorly? You could fire him and replace him before the day was out.
In the time of widespread agriculture this was not possible. Distances between plots were far, transportation was slow, population densities were low, and production was highly inefficient. Under these conditions slaves were extremely efficient because even if paid labor would have been more efficient - it simply did not exist on the scale and readiness needed. And this was, again, also happening at the same time that ever large plots could be maintained by ever smaller numbers of individuals due to productivity gains. These changes were happening at an exponential rate by the mid 1800s. Lincoln killed slavery because he could, and the reason he could is because of economics.
Getting back to Aristotle [mit.edu], it's somewhat interesting that his wisdom drove him to prediction of precisely what happened, though he no doubt felt he was engaging in little more than a rhetorical hypothetical:
(Score: 1, Troll) by Thexalon on Friday November 29 2019, @12:25AM (1 child)
And that's why advertising and public relations don't exist.
Nonsense. For example, pay for engineers (a male-dominated profession) is substantially higher than the pay for teachers (a female-dominated profession), even though both professions generally require a master's degree and long hours (yes, even factoring in summer vacations for teachers). There are many top-quality teachers earning less than mediocre engineers.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 1, Insightful) by Anonymous Coward on Friday November 29 2019, @06:16PM
Wow. You're probably just about the dumbest person on this site. Does _every_last_reason_ have to be listed? Did you not consider "need" or "desireability of profession"? You're comparing the earnings of engineers and TEACHERS and suggesting women are underpaid compared to men?!?
This is a prime example of a straw-person argument.
(Score: 2) by FatPhil on Friday November 29 2019, @02:15AM (4 children)
The "true" value being the cheapest value possible that an apple can be sold for while still providing a profit to its seller.
The price of an apple has nothing to do with what 'the market's controllers tell it to value' - it has everything to do with how cheap you can produce an apple and sell it!
"""
Why do I need to debunk this trope every time there's a story about 'markets'? The above is a pure fiction unsupportable by neither mathematical theory (read some Patero, you're a few hundred years behind the times), nor practice (not that a well-functioning market is easily found).
It is just as true (and equally, just as false) to say that in a well functioning market, the price of a good or service will be maximised, as there's no asymmetry between the resources being exchanged.
Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
(Score: 2) by aristarchus on Friday November 29 2019, @07:29AM (3 children)
FTFY, no thanks necessary.
(Score: 2) by FatPhil on Friday November 29 2019, @12:07PM (2 children)
I did notice it after posting, but couldn't be arsed to follow up to myself as anyone whose only comeback is a typo snark has nothing of value to contribute, and I don't mind them outing themselves as such.
Expect typos in this too - this shitty PC keyboard has a habit of dropping 2 or 3 consecutive characters, and having unpredictable rollover behaviour.
Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
(Score: 2) by aristarchus on Friday November 29 2019, @08:03PM (1 child)
Good, Phil! I was worried about you.
(Score: 2) by FatPhil on Saturday November 30 2019, @08:41AM
Know any cures for insomnia?
Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves