June 27, 2012 Practice Points

Leadership Bias—Male CEOs get the Advantage with Investors over Female CEOs

By Louise N. Smith

New research suggests that gender considerations affect how much investors are willing to pour into a business. According to a working paper recently released by researchers from the University of Utah and Washington University in St Louis, IPO firms led by male Founder/CEOs are more attractive to investors than IPO firms led by female Founder/CEOs.

The study revealed that even when male and female CEOs shared identical performance histories, experience, and qualifications, female CEOs were still regarded as less experienced, less able to lead, and less likely to resolve disputes and board deadlocks than their male counterparts. The study reaffirmed that gender bias is not so much about numbers as it is about attitudes and cultures.

In the study, groups of MBA students were presented with data on fictitious companies and were asked to evaluate whether the firms would be good investments. The results showed that the students were four times more likely to invest in the IPOs of firms with male CEOs than of those with female CEOs. Moreover, the anticipated share price of IPO stock was eleven percent higher for firms with male CEOs than for those with female CEOs.

It is well established that gender biases also play a part in job evaluation procedures. However, new research out of Harvard suggests that organizations may overcome gender biases in job assignment and promotion by grouping employees of different genders or ethnic backgrounds together during performance reviews. According to the research, joint rather than individual reviews can force managers to be more conscious of gender stereotypes.

Keywords: woman advocate, litigation, female, CEOs, gender, bias

Louise N. Smith works at Barrett & Farahany, LLP in Atlanta, Georgia.


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