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| What Grand Slam Tennis Means for Girl Power Profits |
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| Written by Eben Esterhuizen | |
| Wednesday, 23 July 2008 | |
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For the first time since the women’s movement came about, an economic recovery has come and gone and the percentage of women at work has fallen, not risen, the Bureau of Labor Statistics reports. Has girl power lost its momentum? Women continue to be underrepresented in top management positions on both sides of the Atlantic. Currently, 12 FORTUNE 500 companies are run by women, and a total of 24 FORTUNE 1000 companies have women in the top job. That's down from last year, when 25 FORTUNE 1000 companies were run by women. 
Photo: vintage-ragdoll, Creative Commons, Flickr Why don't we have more women in top management positions? (Hint: this article is not about gender inequality, it's about the money we are flushing down the drain by keeping women out of top positions.) There is evidence to suggest that companies run by women perform better on the stock market. Mekong Capital recently conducted a research project on the profile of publicly listed companies that outperformed within Vietnam’s stock markets in the period commencing on 1 January 2007 and ending 10 April 2008. While 9% of listed companies in Vietnam have female CEOs, 27% of Vietnam’s market capitalization is represented by companies with female CEOs. Over the period of Mekong Capital’s study, companies with female CEOs delivered an annualized return to shareholders of +8.9% while companies with male CEOs delivered an annualized return to shareholders of -20.4%. The average market return over this period was an annualized -16.3%. In Finland, banks recently issued a new index option tied to firms that have women in leading positions because such companies have been shown to be more profitable. There is also evidence to suggests that companies with the greatest number of women on their boards performed significantly better financially than companies with fewer female board members. So if evidence suggests that females improve corporate performance, why don't we have more females in top management positions? And what does it have to do with Grand Slam tennis? "Tennis matches are particularly well-suited for statistical analysis," explains Daniele Paserman, an Associate Professor of Economics at Boston University. Paserman points out that tennis' non-linear scoring structure introduces significant variation in the importance of individual points. "It is often a small number of individual points at critical junctures that determine a match’s result," he argues. "A break point in the latter stages of an evenly fought early set can be more decisive than a point in the early stages of the final set. It is exactly this substantial variation in the importance of points across and within matches that allows identification of a link between performance and the degree of competitive pressure." Here is the crux of Paserman's experiment: "Women are significantly more likely to hit unforced errors at the most crucial stages of the match, while men exhibit no significant variation in performance. Specifically, about 30% of men’s points end in unforced errors, regardless of their placement in the distribution of the importance variable." The bottom line: Passerman's experiment suggests that the sexes perform differently under competitive pressure. Of course, it would be inappropriate to extrapolate from a single study of a group of tennis players to the broader labor market. But other research provides "additional evidence from a series of natural experiments drawn from the French higher-education system where, contrary to tennis tournaments, men and women compete with each other, as is the case when they compete for top management positions." Örs, Palomino, and Peyrache performed a study of approximately 5,750 students who, over the 2005-2007 period, took the highly competitive entrance exam for admission to the HEC School of Management in Paris, a "grande école" and a top-ranked European business school. "We compare gender differences in entrance exam performance with the performance of the same population on the high school finishing exam (the French baccalauréat) two years prior and the subsequent first-year of their studies at HEC," they write. On average, men perform slightly better than women in both the written and oral exams despite evidence the female candidates are ‘better’ in the sense that:
"Taken together, these results suggest that, within the same sample of subjects, the competitive pressure generated by relative performance evaluations has a different impact on men than on women," they argue. "This provides an alternative (albeit, by no means exclusive) explanation for under-representation of women in top management positions, if one takes the perspective that these positions are the rewards of performances in a series of competitive tournaments during one’s professional career, as opposed to pass/fail type of evaluation processes." In other words, under-representation of women may start as early as the professional schools that select students based on competitive exams. If we change the application processes for business schools, will we see more female execs in the future? Considering the outperformance of female CEOs, I certainly hope so... For a list of companies with female CEOs, click here. Culture 
Eben Esterhuizen 
Opinions 
Comments
(5)
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written by David Neubert , July 29, 2008
Where can I find that list of companies run by women?
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written by Jim , July 31, 2008
Is the baccalaureat considered less competitive than the entrance exam simply because the pass/fail line does not depend on the performance of other students? Is there some benefit to doing exceedingly well beyond just passing? Considering that this group is highly gifted and could pass with minimal effort, perhaps the women had a lower self-image with caused them to prepare better for the low-stakes pass/fail baccalaureat than the men who were confident that they could coast through easily. This would have chopped the lowest-performing men out of the cohort, yielding higher average scores for the men on the test that they actually cared about doing well on.
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written by LauraS , July 31, 2008
This doesn't seem to indicate a problem with the way women achieve in high-stakes competitive situations. It strikes me as indicative of problems with the kinds of tests used to admit students to programs like the HEC. If the test is not indicative of past performance (in that men with, on average, lower baccalaureate scores are scoring higher on this exam) or future performance (in that, while women are less likely to pass the exam, they are more likely to earn higher grades than men once admitted), then what is it measuring? It seems that the test is completely invalid for assessing the qualifications of half the population. Perhaps more attention needs to be paid to developing non-biased systems of assessment, rather than looking for what makes women "under-perform" in these situations.
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written by Dan , July 31, 2008
I'm no misogynist but doesn't the fact that women perform worse under high pressure conditions indicate that they are worse suited for high stakes jobs such as CEO positions?
In the Vietnam stock market analysis I fear the analyzers are falling into the correlation indicates causation trap. Isn't it just as likely that companies that are more progressive and innovative are both better performers AND more likely to put women in the top seat? Lastly, to prove women are equally or better suited for CEO positions shouldn't a study be done to compare decision making processes under high pressure situations? I bet that women are show little variation in their objectiveness as stress levels rise while men tend be be less and less objective as the pressure mounts. This, if true, would certainly be a great argument for women CEOs.
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written by assignment , May 05, 2009
Nice information
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