The chief executive at a plastics company was playing golf. A lot of golf.
The activist hedge fund the Barington Capital Group, through a website that tracked golfers’ handicaps, found that the chief executive was routinely playing 18 holes or more on weekdays, even as the company’s stock price was lagging.
It was that finding a decade ago that helped shape the career of Dianne McKeever, then a partner at Barington.
Lack of oversight by the company’s board enabled the incessant golf games, and the chief executive’s time on the green was keeping him away from trying to fix the stock price, Ms. McKeever argued.
“This was a perfect example of why diversity of all types — not only gender and multicultural diversity, but also operational and skill-set diversity — is needed in the boardroom,” Ms. McKeever said.
“The board’s chumminess and insularity were impediments to making those difficult, but necessary, decisions,” Ms. McKeever said recently.
To her, the episode amply illustrated how a lack of gender diversity could contribute to deficient corporate governance, like a distracted chief executive, and board entrenchment.
And yet activist hedge funds are also often guilty of nominating only men as candidates for a board. Since the beginning of 2011, five of the largest activist funds nominated 174 directors, just seven of them women, according to a March report by Bloomberg.
However, a number of studies have shown the benefit of having at least one woman on a corporate board, including better director attendance, fewer rash acquisitions and a lower rate of earnings restatements and fraud.
Ms. McKeever, 38, and her partner and co-founder of Ides Capital in Manhattan, Robert Longnecker, 42, saw diversification as a missing part of the typical activist strategy.
Ides, which was started about a year ago, has a short track record, with only one public battle — and the fund is small. But it appears to be the first activist hedge fund in the United States fronted by a woman, according to data compiled by Josh Black of Activist Insight, a research firm that tracks the subject.
Like any other hedge fund, Ides seeks to generate returns from its investments and sees diversifying small and midsize corporate boardrooms as a way to help improve stock prices.
“Weak governance practices, including a lack of diversity, coincides frequently with poor valuations,” Ms. McKeever said in an interview. “Those improvements, in our minds, are no-brainers.”
In starting Ides, Ms. McKeever is charging through the notoriously male-dominated world of activist investing, known for the famous personality-driven investors like Carl C. Icahn, William A. Ackman, Daniel Loeb and Nelson Peltz.Traditional activist investors also rail against the chumminess of corporate boards but do so by incorporating their own associates, who, more often than not, are male and white.
Ms. McKeever grew up in Indianapolis. Her father was a small-business owner who taught her about companies by letting her buy and sell stocks at a young age. She moved to the New York area for college, majoring in chemistry at New York University and chemical engineering at Stevens Institute of Technology, and later attended law school at Fordham.
She got into activist investing after meeting James A. Mitarotonda, the founder of Barington, at an event at N.Y.U., which he had also attended. She began working at the firm in 2001.
“Having worked with Dianne for almost seven years, it is not surprising to me that she would start an activist hedge fund focused on improving gender diversity,” said Mr. Mitarotonda, the chief executive of Barington. “She feels strongly about fairness and equality.”
Shortly after starting Ides, Ms. McKeever wasted little time with her first public fight: Boingo Wireless, a company known for providing Wi-Fi, for a fee, at airports.
In a letter to Boingo in April, she listed various corporate governance mishaps, including “the board’s failure to diversify the boardroom.” She later filed proxy materials, nominating two directors to Boingo’s board: one woman and one man.
Ultimately, Boingo agreed to settle with Ides, expanding the board from six to nine members. Ms. McKeever agreed to withdraw her two nominees in exchange for the three that Boingo brought in. One of the three was a woman, the first since the company went public.
“We believe diversity at every level of the company is critical to Boingo’s success,” said Lauren de la Fuente, a spokeswoman at Boingo. “It’s why we were already actively engaged in recruiting women onto the Boingo board when Ides Capital approached us, and had been in discussions with Kathy Misunas, whom we subsequently added to the Boingo board.”
Since Boingo and Ides reached their settlement on June 1, shares of Boingo have gained more than 30 percent.
Boingo was not an anomaly, especially among smaller companies. About 60 percent of corporate boards have no female directors, according to a recent study by the Peterson Institute for International Economics, a think tank, which surveyed nearly 22,000 companies worldwide.
Some countries, like Norway and Germany, have passed laws that require a minimum percentage of women on each corporate board. In the United States, where there are no such requirements, shareholders have taken it upon themselves to change board composition. More than 250 proposals have been made since 1997, according to data compiled by Carol Marquardt, a professor at Baruch College, and Christine Wiedman, a professor at the University of Waterloo.
But the growing class of shareholder activists, many of whom promote themselves as the stalwarts of corporate governance, have a paltry record when it comes to women.
In addition to nominating fewer women as directors, they appear to disproportionately target female chief executives. The Fortune 500 executives Meg Whitman of Hewlett-Packard, Indra Nooyi of PepsiCo, Irene Rosenfeld of Mondelez International, Ursula Burns of Xerox Corporation and Sheri McCoy of Avon Products have all encountered activist investors.
Chief executives who are women have a 27 percent chance of facing activist investors, while the likelihood of male chief executives doing so is closer to zero, according to research published by Arizona State University in August.
A potential reason for this is that upon announcing female leadership at a company, the market tends to react negatively, sending its stock price lower, according to Christine Shropshire, who wrote the study for A.S.U. There can also be spillover effects, where the stocks of other female-led companies fall on the appointment of another woman chief executive, she said. Activists focus on companies that they perceive to be undervalued, which may explain some of why they have targeted women-run companies more frequently.
There is also an implicit bias to nominate someone who is demographically similar, said Ms. Shropshire, who has been interviewing female directors at publicly traded firms.
“Their anecdotes about determining the slate of potential board candidates reflect a hesitation among men to change the status quo of boardroom dynamics by bringing in female members, especially more than one,” she said. “Women may be more likely to pose tough questions or engage in more intensive monitoring efforts, though interestingly, I would expect those behaviors could also make them more valued and potential allies for activists themselves.”
That is the bet that Ides is making.