Avon CEO Sherilyn McCoy Pushed Out by Activist Investors

Avon CEO Sherilyn McCoy Pushed Out by Activist Investors

Avon Products announced this week that CEO Sherilyn McCoy would step down at the end of next March after six years in the top position at the beauty products manufacturer and direct-marketer. According to the New York Times, McCoy’s departure was the result of investor pressure to change course after a series of disappointing financial reports:

Barington Capital Group and NuOrion Partners called on Avon Products’ board of directors earlier this year to replace Ms. McCoy as poor results weighed on its stock price. Media reports first emerged in June that Ms. McCoy, who has been the top executive at Avon since 2012, was expected to leave the company.

Avon Products on Thursday reported a net loss of $45.5 million in the second quarter — its third consecutive quarterly loss. The company also said that its revenue fell by 3 percent. Its share price has fallen 40 percent this year. The company said that its board had retained the executive search firm Heidrick & Struggles to assist in finding Ms. McCoy’s successor.

The news at Avon comes at a time when institutional investors are taken on an increasingly active role in shaping management and strategy at the companies of which they own shares, pushing for change in financial priorities as well as organizational culture and talent strategies, and demanding the ouster of CEOs whose performance does not meet their expectations.

Part of what makes McCoy’s departure from Avon noteworthy is that she is among a very limited number of women at the helm of a major corporation. Furthermore, as the Times‘ Julie Creswell remarks, she’s the latest in a string of women CEOs who have been pressured to resign by activist investors:

The day before, Irene Rosenfeld, the chief executive of the Oreo cookie maker Mondelez International, announced her plans to retire later this year. In June, Marissa Mayer resigned as chief executive of Yahoo after it was acquired by Verizon Communications. Like Ms. McCoy, they, too had faced pressure from activist investors.

Several months ago, it appeared as if 2017 would be a bit of a breakout year for women in the C-Suite because, for the first time, more than 5 percent of chief executive roles at publicly traded companies on the Standard & Poor’s 500 Index were held by women. But with only 27 women holding the chief executive post, the departures of even a few will quickly thin the ranks. Those 27 included Ms. Rosenfeld from Mondelez and Debra Crew, the chief executive of Reynolds American, which is no longer a stand-alone company after being acquired last month by British American Tobacco.

A study published last year found that female CEOs were much more likely than their male colleagues to encounter investor activism, though it drew no solid conclusions as to why. One possible explanation is that women leaders are often brought in to fill CEO roles at companies in already precarious circumstances—the so-called “glass cliff”—where they face higher than normal odds of failing and being pushed out. Another is that women leaders are perceived as less aggressive, competitive, and focused on short-term financial performance than men.

Yet another possibility is that the communities of investors and directors remain predominantly male, leaving women leaders short of other women to stand up for them when they come under fire. While the number of women CEOs at Fortune 500 companies reached a record high on this year’s list (32 out of 500), the number of women on Fortune 500 boards actually declined. The short supply of female directors, Bloomberg’s Jeff Green adds, may be why only three of the 19 women to step down as CEOs of Standard & Poor’s 500 companies since 2009 have been replaced by other women:

“It underscores just how truly exceptional it is for a woman CEO to be succeeded by another woman,” said Brande Stellings, senior vice president of advisory services at Catalyst, which tracks diversity in companies. “Since we had the first woman CEO in the Fortune 500 in 1972, there’s only been 62 women CEOs in total, which is pretty staggering.” …

The direction a company takes on diversity comes from its board room, where white men have dominated since the last century. When choosing a new CEO, board members tend to rely more often on people they know than on executives selected by recruiters who screen candidates from a wider field, said Trina Gordon, CEO of executive-search firm Boyden. About 80 percent of S&P 500 directors are men.

“Boards are still not very diverse, and if you don’t have diversity at the governance level, there’s not a lot of changes that are going to happen,” Gordon said.

Small wonder, then, that one in four respondents to a recent Rockefeller Foundation survey said they expect time travel to be invented before half of all Fortune 500 companies are headed by women.