SuppliedA study from the Alberta School of Business recently found that investors tend to favour firms with more female executives.
In 2017, following multiple reports of sexual harassment and assault committed by former film producer Harvey Weinstein and the rise of the #MeToo Movement, the United States (U.S.) capital investment market began to prioritize companies with better gender diversity, according to Lukas Roth.
Roth, a professor in the department of finance at the University of Alberta, found that these events transformed investor preferences to reflect new attitudes around women in the workplace.
“Investors prefer sustainable investments. [They] care about corporate culture, and they especially care about workplace harassment,” Roth said. “They began to favour firms with a non-sexist culture.”
The Weinstein scandal and the #MeToo Movement increased people’s awareness of issues regarding gender diversity, according to Roth.
“You have this widespread scandal that wakes people up and makes them see what’s really going on,” he said. In the two weeks following these events, Roth and his team reviewed the financial data from Standard and Poor’s (S&P) 1500 firms. The S&P 1500 is a U.S. stock market index.
What they found was firms with more women in high-paid roles saw an increase in institutional ownership and greater investor interest. During the Weinstein scandal, these firms earned excess returns of 1.3 per cent.
According to Roth, companies noticed the change as well. Firms with poor gender diversity began hiring more female executives to cater to investor preferences, Roth said.
“Financial markets have a key impact in improving the social sustainability of firms,” Roth said.
Roth marked this change in investors with low Environmental, Social, and (Corporate) Guidance (ESG) scores. ESG is used to assess company health beyond financial performance. Although these stockholders did not prioritize social issues in previous investments, they began to favour firms with a non-sexist culture after the Weinstein scandal, Roth said.
This study mainly focused on companies in the U.S., but Roth “expect[s] that the events triggered similar attention [to workplace sexism] within Canadian corporations.”
According to Roth, there are financial incentives towards improving gender representation. According to the study, only five per cent of the companies in Roth’s study had female chief executive officers (CEOs) and more than 60 per cent of firms did not have women in their highest-paid positions.
Roth will continue exploring these issues, especially regarding financial innovations and their impact on women in leadership roles.
