Firms with women on their boards have consistently outperformed those led by only male directors, “proving the business case” for greater numbers of female directors, researchers have claimed.
The Credit Suisse Research Institute measured the share price performance of 2,360 companies globally over the past six years and concluded that “it would on average have been better to have invested in corporates with women on their management boards than in those without”.
Overall results showed that companies with at least one woman on their board produced a 16 per cent return on equity, 4 percentage points higher than firms with no female board members. Gender diverse boards also showed better than average growth, growing turnover by 14 per cent over the six years compared to 10 per cent for those lacking female directors.
However, researchers admitted: “There is a bias from the skew in female representation towards certain sectors (consumer-related), certain markets (Europe) and towards large-cap stocks.”
To account for this, researchers weighted the results to make them ‘sector-neutral’, as well as making adjustments to account for differences in market values and differences in returns between global regions.
The study group was also split into two categories for larger and smaller companies, and while the effect was more marked for larger firms, both sets showed a clear outperformance by the gender-diverse group.
Researchers pointed to several key reasons why greater gender diversity correlated with stronger corporate performance, which included greater effort across the board, a better mix of leadership skills, access to a wider pool of talent and better reflection of the consumer.
In the report, Professor Katherine Phillips, the Paul Calello Professor of leadership and ethics at Columbia Business School, New York, said: “Given trends in globalisation, immigration and demographics, the composition of the workforce is likely to look very different in the long run. Greater diversity suggests a change in the working environment to adapt to the needs of different people.
Companies that can do this better are more likely to attract the best talent, no matter who that talent is and that should be a strategic advantage for that company.”
The number of female board members is growing and in the UK; it now stands at 16.7 per cent, up from 12.5 per cent a year ago, due in part to the work of theLord Davies review. However, the Credit Suisse report showed that the fastest rate of gender diversity improvement was in Europe, while Asian markets, both emerging and developed, have lagged behind.
The exception was China, which has made great strides in recent years, moving from just 6.5 per cent of firms with at least one female board member in 2005 to 50 per cent in 2011.