Generating Extraordinary Profits by Hiring Women CEOs

Rucker Capital’s Strategy

Generating Extraordinary Profits by

Hiring Women CEOs

In 2012 McKinsey & Company research reported that at the time there were very few women represented as CEOs and only 14% serving on executive boards in Fortune 500 companies.

Rucker Capital Advisors, LLC (“Rucker Capital Advisors”), a New Jersey based merchant bank, believes that its willingness to place women in the c-suite of those companies it acquires will allow it to generate extraordinary profits for its investors and itself. Sandra Rucker, Co-founder of Rucker Capital believes that mid-level executive women at Fortune 500 companies who are tired of hitting the glass ceiling are potentially a recruiting goldmine for its portfolio companies. She states, “Women in these mid-level executive positions are the best of the best. They often have worked harder than their male colleagues but are still overlooked by the boards of directors when it comes to making women CEOs, CFO, and senior managers. We must change the ratio of CEO men to women. We will hire these women for c-suite positions and generate extraordinary returns on capital.

Rucker Capital is made up of contrarians that typically do the opposite of conventional wisdom citing that while there are a small percentage of women CEOs at this time, those numbers are growing and will continue to exceed the current 5% that “make up more than half of the top tenth of earners and 44% of all the executives with profit-and-loss responsibilities”, as reported this year by The National Association for Female Executives (NAFE). Rucker Capital’s founders believe that women in mid-level and senior positions at Fortune 500 companies are frustrated with the glass ceiling and would be open to taking positions in its acquired companies.

Long term studies support Ms. Rucker’s thesis. In 2012 McKinsey & Company research reported that at the time there were very few women represented as CEOs and only 14% serving on executive boards in Fortune 500 companies. Since those time studies now show these numbers are growing significantly and companies that have 50% of women in senior management positions produce higher profits and returns than those with fewer women in senior management positions. Despite these higher returns over their male CEO counterparts, Women are still under represented on boards of directors and senior management positions.Another study in 2015 by Quantopian and referenced in Fortune Magazine concluded that between 2002 and 2014, women CEOs generated equity returns that were 226% better than CEOs of members of the Standard and Poor’s (“S&P”) 500 index. Hypothetically speaking, $100,000 invested during the period would be worth $448,158 if it were invested in those companies with women CEOs and only $222,306 if invested in the S&P 500. The results for women CEOs would have been even higher if dividends were reinvested.

A third study by Credit Suisse in CS Gender 3000 report found “that the higher the percentage of women in top management, the greater the excess returns for shareholders. Hard metrics of financial performance have also justified this superior stock market performance according to the data. From year end 2013 to the middle of 2016, the outperformance of companies with 25% senior women is a Compound Annual Growth Rate (CAGR) of 2.8%, 4.7% for 33% and 10.3% for those over 50% compared with a 1% annual decline for the Morgan Stanley Capital International All Country World Index (“MSCI ACWI”) over the same period. Return on Assets (ROAs) averaged 5.7% for the 50% companies, a 20% premium to the 4.7% average ROA for MSCI ACWI, while leverage (net debt/equity) at 34% is 28% lower. These companies show Return on Equity (ROE) of 19% higher on average and a 9% higher dividend payout. ”

Despite these higher returns over their male CEO counterparts, women are still under represented on boards of directors and senior management positions. Female participation in senior management (CEO) and those reporting to the CEO) showed a global average of 13.8% compared to 12.9% in 2014. Women make up 9.9% of business unit heads (a traditional Launchpad to senior roles and boardroom positions) versus 8.5% in 2014, which is an 18% increase. However, with only one in ten women heading these business units, the current rate of progress would achieve gender parity by 2070. Shared services remains the main employer of women at senior levels accounting for 33% of female management positions globally and underlines how women’s path to the top is still concentrated in that area.

Rucker Capital’s willingness to place women in the c-suite is clearly a contrarian strategy that separates it from mainstream corporate strategy. This fits well with the Company’s core belief that you cannot make extraordinary gains by doing what everyone else is doing.

Source: This article was produced with excerpts from materials from the sources mentioned in the article