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Companies See a Boost In Stocks After Black CEOs Are Appointed, New Study Shows

Black CEOs of major corporations are few and far between. Only six companies on the Fortune 500 list had a Black CEO, according to 2022 data. But when a company does appoint a Black CEO, that brand’s stock, a new report finds, goes up.

Research shows Black corporate leadership turns out to be better because Black executives are usually overqualified by the time they reach the corner office, The Washington Post reported.

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Success is in the Numbers

A study from 2001 to 2020 by Strategic Management Journal finds that appointing a Black chief executive will increase the company’s market capitalization by 3.1 percent in three days after the appointment has been made public.

When whites are placed in the CEO slot, the company’s market capitalization drops by .91 percent in three days.

The Reason Why

Oftentimes, the work credentials of Black people seeking positions of leadership are more impressive than their white peers, according to Seung-Hwan Jeong of the University of Georgia and Ann Mooney Murphy of the Stevens Institute of Technology.

“To be considered for appointment as CEO, a Black executive would have to repeatedly prove themselves over the course of their careers in ways White CEOs do not,” the researchers wrote. “As a result, newly appointed Black CEOs are likely to exhibit exceptional attributes relative to their White counterparts.”

Compared to white executives, 93 percent of Black CEOs have advanced degrees, 1.6 more years of education, and more have degrees from a top university. Fifty-three percent of white people reportedly have advanced degrees.

“While it is encouraging that markets recognize the strong qualities of Black CEOs, our study also suggests that firms seemingly appoint Black CEOs only when they are excessively qualified,” Jeong said. “We likely have Black executives who would do quite well who simply are never given the chance to lead an organization.”

Black CEOs Still MIA

Despite this finding, among Fortune 500 companies, 90 percent of the CEOs have constantly been the same old white men, The Society Pages reported.

The number of new and diverse CEOs has been slowly increasing, going from 19 in 2000 to 71 in 2020. There also has been a steady decline in white male CEOs as white females have risen through the ranks.

Over two decades of seeing new CEOs join the ranks, white women have made up the majority with 67 new executives. Black CEOs, regardless of sex, make up the second lowest in new appointees, with the lowest being East Asians.

As for income, according to Fortune, median total compensation for CEOs is $15.5 million.

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