Do Top Women Execs = Stronger Ip Os?

A study finds that the more of them a startup has, the better it does

Having women at the top of a company that is about to go public can improve the bottom line. So says a study, Wall Street Likes Its Women: An Examination of Women in Top Management Teams of Initial Public Offerings, by Theresa Welbourne, a University of Michigan business professor of organizational behavior and human-resource management. Welbourne found that higher numbers of top women managers at such companies improve stock prices and earnings-per-share after the IPO. She originally examined 476 companies from their IPOs in 1993 through yearend 1996. Data collected so far from IPOs that took place in 1996, 1998, and 1999 show similar results.

How much better is the company's financial performance? For executive teams that were at least 10% female, stock prices climbed 65 cents, or 4.6% more than at companies with no top women managers (table). Earnings per share for those companies rose 9 cents more, or 56%. When women made up half the management team, stock prices rose $3.25, or 23% more than at companies with no top-brass women. Earnings per share went up 45 cents, or 281%. That may not sound like a lot, but the average IPO price for the companies was $14, and the average earnings per share was 16 cents.

Welbourne's findings emerged while she was doing a broader study on what makes a successful high-growth company. She became intrigued by the impact of women managers on corporate performance after she noticed an increased presence of women in the upper echelons of startups. In 1988, when she began her research, none of the 136 companies that went public had women in top positions. By 1993, 27% of the 535 companies that went through IPOs had senior female execs. That jumped to 37% of the 898 companies that went public in 1996, 43% of the 508 IPOs in 1999, and 45% of the 419 IPOs in 2000. Welbourne used data from company prospectuses, which identify senior managers.

Welbourne's study doesn't answer how or why women boost stock prices or earnings, but she has a few theories. Many talented women executives who are burned out or have hit a glass ceiling in the corporate world defect to startups or launch their own companies so they can have more of an impact on a business. "These smaller companies are able to hire high-powered women managers who may make a real difference" before, during, and after the IPO, says Welbourne, who is also chief executive officer of eePulse in Ann Arbor, Mich. The privately held company polls corporate employees about work issues and helps management analyze the data.

KEY INPUT. Welbourne says other research she has done shows that women employees tend to interact more with women managers than with men. "That means the men managers were missing a key component of input and information from company employees" that could have helped to improve company performance, says Welbourne.

Perhaps more important than the presence of women alone is the mix of women and men that made IPO companies' stock values climb higher, Welbourne suggests. "When you have diversity in top management, you have people looking at data differently, and that brings better decision-making overall," she says.

Isabel Maxwell, president of Commtouch, a Mountain View (Calif.) global-messaging service, agrees: "Having different perspectives is extremely helpful" in the business world. Commtouch went public at 16 in July, 1999, and rose to 68 before the Nasdaq tanked in March, 2000. While careful to say that the "qualities you need to lead a company are the same regardless of gender," Maxwell notes that women who have struggled with family and career have more practice juggling multiple activities than their male counterparts. No doubt, those are useful skills to have when managing a company through a transition, such as an IPO.

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