Theresa M. Welbourne

(WOMENSENEWS)–The presence of women in top management is a critical factor in the success of initial public offerings, says professor Theresa M. Welbourne, author of “Wall Street Likes Its Women: An Examination of Women in the Top Management Teams of Initial Public Offerings.”

“The data just fell out,” said Welbourne, an associate professor of organization at the University of Michigan Business School. “It’s not what we were looking for.” The paper, part of a larger study, is based on research conducted from 1993 to late 1998 using data from more than 500 firms of varying size and scope.

Although Welbourne’s data produced results on gender, she is willing to go beyond the data and suggest that her study indicates that diversity–gender, race and culture–is what appeals in today’s marketplace.

“It’s my interpretation of the data that the diversity of the top management team makes for better business decisions which makes for higher performance,” says Welbourne, also chief executive officer of eePulse, a human resources consulting firm.

In 1993, 27 percent of the initial public offerings she tracked had women in management positions. In 1996, that number increased to 41 percent. “The study empirically links the presence of women in the top management team to firm performance within a sample of IPO firms,” Welbourne wrote. Initial public offerings are the first time a privately owned firm offers shares for sale to the general public. Generally speaking, an IPO indicates that the company is doing well enough to be attractive to the stock market.

The study tracks the short-term performance of these businesses using three indicators: a market price to book value equation (called Tobin’s Q), three-year stock price growth and growth in earnings per share. The findings are supported by statistical analyses based on variables such as whether the company was unionized, owned by its chief executive officer and other risk factors.

The study also relied on prospectus information filed with the Securities and Exchange Commission. The prospectus is the legal and financial statement of any publicly traded or pre-initial public offering company. Tobin’s Q was used because Welbourne said it reflects the market’s reaction to a firm.

Number of Women Increasing in Top Management at Valuable Firms

“The effects on short-term performance should be an indicator of how investors evaluate the presence of women on top management teams, and the effects on long-term performance demonstrate whether investors are making informed decisions,” Welbourne said.

The number of women in upper level management at companies making an initial public offering is growing because “women appear to have a positive effect on the firms’ short-term performance,” she wrote in her study.

Research shows that members of a monochromatic management team will view information in the same way. But diverse management teams gather and interpret information uniquely.

“It’s about getting information from your employees and vendors,” she explained. “It’s about getting the best information you can,” she said. “If your company is 50 percent women and they don’t talk to the male management team … you’re not getting as much information as you can.”

In contrast, Welbourne adds, “Women coming into these (high level positions) notice that women are talking to them and they’re getting more information that they can feed back to the management team,” she said.

Denise Ryan, president of BluMarble, a marketing firm, said it’s also important to reflect women as consumers. “We live in an environment of balance, so it kind of makes sense to have both men and women on a management team,” she recently told WIREDNews. “It’s difficult for a company to succeed if they’re not acknowledging women as part of their target market.”

Welbourne emphasized that “diversity” does not necessarily mean women only. Companies should not necessarily recruit women but diversity, she said. If a team were all women, they should be recruiting men, she said. The same need for a good mix would also apply to racial and ethnic diversity.

Business School Grads Want to Work for and Invest in Diversity

Welbourne worked in human resources for 10 years before pursuing her doctorate. She also has taught at Cornell University where she published extensively, and she describes the new generation of business school graduates as having a different agenda than those of the previous decade.

“These MBA candidates want to be seen as individuals and go to a company that’s cool–with a real good mix of people in the company,” she said. They want to work for companies with diversity in management positions, Welbourne adds, and for companies with missions they can believe in, “no matter what the industry.”

Her students would also invest in diversity. She gave them annual reports and asked one question: Which companies would you invest in and why? Her students shied away from companies with annual reports that had pictures of all white males. “The students wouldn’t invest (in those companies),” Welbourne said; “it sends a signal as to what kind of company you are.”

The result is that companies who wish to compete for young talent should take heed.

“Even with the dotcoms in trouble, every company is scrambling to get the best and brightest,” she said. Companies must adapt quickly or perish in the post-2000 economy. “There is not a company out there that can change quickly and be flexible without the right kind of people,” she said. “Who are those people? People who appreciate a lot of diversity,” she said.

Small companies hold a competitive edge when it comes to attracting women for management positions, she added.

“Small companies attract really great women because they don’t want to be in large companies where they perceive a glass ceiling,” Welbourne explained.

Adding to or diversifying the upper level management of a company or “doing the people thing right,” as Welbourne puts it, will be an adjustment for the entrenched majority. But if corporate success is the goal, diversifying is worth the effort.

“It’s very good for you,” she said. “It’ll make you feel very uncomfortable, but mixing it up can be a lot of different things.”

Nancy Schaadt is a free-lance journalist based in Dallas.

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Women’s Enews Follows Up

Clinton Vetoed Flawed Bankruptcy Bill

(WOMENSENEWS)–The Senate passed the flawed bankruptcy bill that made women compete with credit card companies to collect debts from their spouses. President Clinton vetoed the bill as promised. He had said that it put working families and single mothers at a disadvantage. Congress has adjourned, so Clinton’s veto will not be overridden.

Because of the unanimous support of the Republicans for this bill, President-elect George W. Bush might be expected to sign such legislation. Before that could happen, however, the reconstituted House and Senate would have to pass the legislation anew.

While such passage is likely in the Republican-controlled House, the Senate might be more skeptical. Some former supporters of the bill have retired or moved on to other positions in the Senate, and newcomers to the Senate might wish to take time to familiarize themselves with the effects of the bill on working families generally and women heads of household in particular. It is possible that new, compromise legislation might be proposed. –The Editors