LEADERSHIP / JUN. 24, 2014
version 4, draft 4

New Investment Fund Buys Only Female Friendly Companies

Companies with a high ratio of women at the top tend to return better investment results than enterprises run by men only, various studies have shown. That is why it is odd that so few companies are managed by gender-diverse executives.

The pay difference between men and women is an equally much-lamented fact, but nobody seems to be prepared to do something about it. Perhaps one way to effect change is to put a monetary value on the anomaly. That’s not entirely the thinking behind Wall Street’s newest mutual fund, but it goes some way.

The investment vehicle, called the Ellevate Global Women's Index Fund set up by Sallie Krawcheck, is buying only the stock of companies that put a certain ratio of women at the top. Not to punish the companies that don't directly, but to kick their ass AND have money to show for it. It reverse engineers the saying 'if you can't beat them, join them'.

Krawcheck, the owner of the professional women's network Ellevate, used to be a high-profile Wall Street executive at Citi, Bank of America and Smith Barney, before teaming up Pax World Management to launch the fund.

The Ellevate investment fund tracks the top 400 woman-friendly companies in the world, which Krawcheck says ‘is a way of expressing that investment case’.

Investors are offered "a pure apples-to-apples comparison to actually measure and capture the investment return associated with gender leadership,” says Pax World President Joe Keefe in an interview with the Washington Post.

Companies which employ a high ratio of women in top positions include PepsiCo, which has five women on its 13-member board of management as well as a female chief executive. Lockheed Martin is another female friendly place, with a 30 percent ratio of women at managerial positions which include the CEO slot. Its board consists for 33 percent of women.  If you take the Fortune 500, women make up about 20 percent of board positions on average, whilst they only fill about 14.6 percent of these companies’ CEO jobs, according to research by Catalyst.

The outperformance of the female friendly companies does not necessarily have to mean that at an elementary level women are better than men -there’s no point in arguing the case this way- but it’s better to look at things like gender diversity to understand outperformance.   

For instance, for Krawcheck the decision to actually start the mutual fund fell when she was shown data by former Catalyst chief executive Ilene Lang indicating how diverse teams outperform even more capable teams.

"I was like, 'Stop, what did you say? Say that again?' " Krawcheck says. "Probably because I grew up in industries where anything can be solved by raw intelligence, it stopped me dead in my tracks."

Even though the number of projects making money off of diversity at the workplace is virtually zero at the moment, Krawcheck will likely have to brace herself for some competition in the longer term. Already, the Obama administration has promised to make the pay differential between men and women an issue in the November general election later this year.

That will also hopefully give wings to initiatives like Equal Pay Day, an annual event taking place in various countries on the date that symbolises how far into the new year the average female in a particular country has had to work to earn what the average male had made on 31st December in the previous year. In the EU, the most recent Equal Pay Day was on 28 February.  

Do you work for a company that is gender diverse? How do you think gender equality should be accomplished?

Image credit: Callison Burch, cc

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