The myth that women talk more than men is just that – a myth – at least when it comes to corporate earnings calls.
And if you are a senior executive called Jennifer or Laura, you are likely to have contributed to the increase in US female boardroom representation in the past 10 years.
These are just two of the insights we have gained from developing natural language processing (NLP) language models for use in our stock selection process. Companies’ quarterly earning calls transcripts are among our key data sources, and we looked at these transcripts from a diversity point of view – the results were surprising.
Gender balance starting to improve
Usually it is the company chief executive (CEO) and chief financial officer (CFO) who speak to investors on earnings calls. Our NLP model allows us to assess gender balance at these companies – and we found that businesses are making progress, but it is slow.
Among US companies, the proportion of comments from female CEOs (or equivalent) rose from around 3.5% of the total participants on earnings calls in 2004 to 5.5% in 2018. In fact the increase has only taken place since 2010 (Chart 1). For female CFOs, participation rose from around 10% to 13%, albeit with a fall during the Great Recession. Among Investor Relations officers, female participation is much higher, but fell from around 38% to below 34%.
These biases and trends are almost identical for large-cap and small-cap companies, and for non-US companies (see ‘International’ on Chart 1). Furthermore, progress towards gender balance in earnings call participation at CEO and CFO level was made in almost all US industries (Chart 2). This gives us confidence that listed companies have successfully increased female participation in senior management. Incidentally, the widely reported pattern of relatively low female representation in Information Technology workforces compared to other industries is not seen in this analysis of senior roles.
Meanwhile, a quite different pattern emerges when looking at investment analysts asking questions during earnings calls. The number of female investment analysts’ comments fell from 12% to 11% in US large cap (Chart 1), with significant falls in several industries being offset by increases elsewhere, notably healthcare (Chart 2).
Chart 1: Female participation in earnings calls – slow progress and bias across roles
Chart 2: Female participation by GICS sector – progress in almost all industries
Source: AXA IM Rosenberg Equities, FactSet, US Census Bureau. Chart shows estimated total female speakers as a proportion of all speakers in earnings calls in each category. CEO: Chief Executive Officer and similar roles, CFO: Chief Financial Officer, IR: Investor Relations Officer, Other Corp: other corporate executives, Analyst: investment analyst participant. Charts based on Rosenberg Equities’ internal universe of securities during the timeframe shown.
Why do men talk so much?
Looking at the length of contributions made by earnings calls participants, we see a consistent pattern that men speak for longer than women in similar roles (2018 data, Chart 3). Remarkably, this pattern holds among CEOs, CFOs and investment analysts in their questions to company management, and across US, international, large-cap and small-cap companies.
It could be the case that female participants are more guarded in their comments, or more economical in their speech – any number of factors could account for this difference between male and female presenters, and warrants further research.
Chart 3: Average speech length in words, 2018
Source: AXA IM Rosenberg Equities, Factset as of 24/05/2019. Chart based on Rosenberg Equities’ internal universe of US securities. Other Corp = other corporate executives. Speech length is shown as approximate word count for all interventions per individual per meeting, split by large/small cap, and US/International companies holding earnings calls.
What’s in a name?
There are many dimensions to diversity, not just gender. There are some interesting points about social diversity that can be inferred by the given names in US conference call participation.
We found that participants on US corporate conference calls are more likely to have the same first name than the typical occurrence of that name in the country’s population as a whole. For example, looking at female participants on earnings calls, we found an increasing number of women called Jennifer, Laura, Lynn, Kimberly, Deborah and Kelly.
The fact that they share relatively fewer names suggests that company officers and analysts (both male and female) have not been drawn from a broad cross-section of the population. In other words, there is a lack of diversity, perhaps – but not necessarily – related to social class, religion, age, or ethnicity bias. We found just one exception: among male analysts, the mix has become more diverse over the past 15 years, to the point where now it is quite similar to the overall US population.
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We used a Herfindahl index for comparison (a standard measure of concentration, see Chart 4). The analysis is split between male and female names. Because female names are simply more diverse across the population than male names we account for that in our analysis.
Chart 4: US meeting participants – first names concentration
Source: AXA IM Rosenberg Equities, Factset as of 24/05/2019. Chart shows Herfindahl index of concentration. Company executives: all company executives, Analysts: investment analyst participants. US average is based on approximate working-age population (birth dates between 1950 and 1980). Chart based on Rosenberg Equities’ internal universe of US securities.
Companies don’t talk about diversity
Finally, we analysed how often diversity and related topics are mentioned in company financial reports and in results meetings. We find no evidence of any trend – for example the word ‘diversity’ was mentioned in various contexts in 5% of meetings in 2018, a rate unchanged since the mid-2000s. We were only a little surprised by this: it’s not unreasonable as company reports and meetings are intentionally focused on financial results.
What does this mean for investors?
For some years now companies have expressed their ambition to increase diversity in their workforce and management. We believe that this goal can have benefits for shareholder returns.
We have previously found evidence that diversity is associated with positive economic outcomes for companies, and a profitability ‘moat’ among companies that are the most threatened by competitive forces. Diversity isn’t just a ‘nice to have’; it is an economic advantage. We are therefore encouraged at the progress our analysis shows in gender balance at US corporates, but in terms of social diversity, there is still some way to go.