In my research and investing I stress three
things: people, structure and value. I look for companies that are
controlled and managed by quality people, have corporate structures that align
minority and majority shareholder interests and trade at valuations that are
below fair value if not outright cheap. This post is about people and how women
are making big strides in developing countries.
One of the most
important steps in my research process is checking the background and
reputation of corporate leaders, politicians and policy makers. Basically
anyone that may influence equity valuations. Over the past several years I
seem to be spending more time researching and evaluating female leaders.
The increase in the number of women leaders in ‘emerging’ and ‘frontier’ markets is particularly noticeable. I've been spending a lot of time looking at companies in these markets as for the last
few years as they've been trading at valuations significantly less expensive than
their counterparts in the ‘developed’ markets.
This is a large and long-term
positive development. Theoretically a larger pool of candidates should
lead to better leaders. This should ultimately benefit companies and countries
that make full use of their resources. I read years ago in The Economist
that educating girls and young women was almost a sure-fire way to increase a
country’s living standards.
The increase in female
executives was most noticeable on a research trip to Romania last year. As I've written before, stocks traded in Bucharest were some of the world’s least
expensive and I went to see if they were merely cheap or had value (see here).
On the last day I realized that
at least half of my meetings were with women. This was especially
surprising considering that most of them are leaders in the traditionally
male-dominated energy companies, the largest sector by far on the Bucharest Stock
Exchange.
In fact, three of Romania’s
largest listed companies are led by women. OMV Petrom – the country’s
largest private oil and gas company is headed by Mariana Gheorghe. Transelectra
– the country’s largest electricity transmitter is headed by Carmen-Georgeta
Neagu, and Nuclearelectrica – the country’s largest electricity generator and
sole nuclear generation company, is headed by Daniela Lulache.
At
my last meeting – with two women executives – I asked what policies Romania had
enacted that led to such a large proportion of female executives. The response was pretty blasé. They couldn’t think
of any, but suspect it
had to do with Romania’s communist past.
This
could be true. Eastern Europe and Russia have a higher percentage of
women corporate leaders than any other region in the world if the 2015 Women in
Business report by Grant Thorton is accurate (see here).
The
report notes that 40% of senior business roles in Russia are held by women, which
is significantly higher than Western Europe’s 26%. The report also notes
that seven of the top eight countries with the highest percentage of women
in senior roles are in emerging European countries. In addition to Russia,
these are Georgia, Poland, Latvia, Estonia, Lithuania, and Armenia. Another factor could be the high proportion of women to men in the
ex-Soviet Union (see here).
Interestingly, one thing that
the warring brother countries (sister countries?) of Russia and Ukraine had in
common until recently were highly respected female finance ministers. Russia’s Elvira Nabiullina
is spoken of as being one of the best in the world and someone who has Putin’s
confidence; while Natalie Jaresko is one of the few people in Ukraine’s
cabinet who seems competent (see here and here).
The Soviet and communist past likely doesn't explain it
all. Half-way around the world there are many women in leadership positions in
Jamaica. As I wrote in last year’s post, this includes the mayor of
its largest city, the head of its stock exchange, its largest bank as well as
its largest electric utility (see here). While the female Prime Minister
recently lost to her male rival, a recent article on corporate merry-go-rounds
in Jamaica emphasizes the prevalence of women in the country’s private sector (see here).
Further south, trends in
Latin America also point to more women in corporate leadership positions.
According to a study by Mercer, by 2025 Latin America should lead the world in
the proportion of women in professional jobs. The report notes that in
contrast to the developed markets, where the focus has been on recruiting women
for top positions, Latin American companies are adding female workers across
the board (see here).
I
don't know if female leaders will do any better than their male counterparts
over time. I’ve read articles saying women make better investors,
financial consultants and political leaders than males. This could be
true, but I suspect that given all the sexism that exists, the ones that make
it to the top faced a much higher barrier to entry so have to be that much
better. As more women enter the workforce and obtain leadership
positions, I suspect they will prove no better or worse than men.
Regression towards the mean works in just about every other large sample set,
and I suspect it will work here.
Another
way to put this: for every Sheila Dikshit (the highly respected Mayor of
Delhi), Tri Rismaharini (Surabaya), and
Michelle Bachelet (2x President of Chile), there’s a Dilma Rousseff (close to
being impeached President of Brazil) and Cristina Kirchner (controversial
ex-President of Argentina).
It’s
been over 20 years since I very briefly met Benazir Bhutto on my second
investment trip to Karachi in 1992, and over thirty years since Aretha Franklin
and the Eurythmics released this blog’s soundtrack (see here). Since then
women throughout the developing world have made great progress. I notice
this on an on-going basis as I look for value around the world.
In
some countries, the proportion of female corporate leaders has leap-frogged
developed markets. I suspect this trend will continue and if anything provides
yet another reason for investors to look at developing countries as a long-term
investment just as they do for ‘developed’ countries.
Other
Influential Women in Emerging Markets (I suspect I just scratched the surface. Please leave
additional insight in the comments section below):
- Ellen Johnson-Sirleaf – President of Liberia
- Sheikh Hasina Wajed – Prime Minister of Bangladesh
- Ewa Kopacz – Prime Minister of Poland
- Ngozi Okonjo-Iweala – Economist and ex-Minister of Finance of Nigeria
- Sri Mulyani Indrawati – Managing Director of World Bank Group, ex- Finance Minister of Indonesia
- Nguyen Thi Phuong Thao – CEO of VietJet and Vietnam's first female US$ billionaire
- Chandra Kochar – CEO of ICICI Bank, India
- Dong Mingzhu – President of Gree Electronic
- He Qiaonu – Founder and Chairperson of Beijing Orient Landscape and China's most generous philanthropist in 2015
- Valeriya Gontareva, Head of the National Bank of Ukraine
