More proof that women board members bring better performance and higher share price

The team at Non Exec Hub have long championed gender equality at board level. One of our frustrations has been enduring the so-called ‘fluffiness’ of the argument: the apparent immeasurability of greater business performance that a more balanced representation would bring.

Last year saw something of a change in that, through the publishing of two seminal reports. McKinsey’s analysis of major plc’s across Europe and the US (in April 2012) saw a strong correlation between greater gender diversity and better business performance, measured in share price, stock yield, company growth and market share. The Credit Suisse report of last summer, if anything, went even further in demonstrating the umbilical connection between greater  female representation and better financial and organisational performance

This month saw a more nuanced but encouraging report that pointed to the business benefit of a more balanced representation. Thomson Reuters’ “Mining the Metrics of Board Diversity” tracked the progress and analysed the effect of women on corporate boards around the world – and revealed how the increase in the number of women on boards affected organizations’ performance. The study is based on data from Thomson Reuters ASSET4 ESG database, which provides in-depth environmental, social and governance information enabling socially responsible investment analysis. The ESG database contains information on 4,300+ global companies and over 750 data points covering every aspect of sustainability reporting.

According to the study, on average, companies with mixed boards have marginally better, or similar performance to a benchmark index, such as the MSCI World, particularly over the past eighteen months. Companies with no women on their boards underperformed relative to organisations with women board members, and had slightly higher tracking errors, indicating potentially more volatility.

“Over the past five years significant measures have been put into place to help increase equal opportunity and diversity, and while there has been a gradual increase in the percentage of companies that have women on boards, there is still a long way to go,”

says Andre Chanavat, product manager, Thomson Reuters Environmental, Social & Governance (ESG).

“This study suggests that the performance of companies with mixed boards matched or even slightly outperformed companies with boards comprised solely of men, further reinforcing the idea that gender equality in the workplace makes good investment and business sense.”

From 2008 to 2012 there has been slow but steady growth in the adoption of policies and processes to promote gender diversity and equal opportunity. Recent progress is particularly significant in the Americas, even without legislation or quotas. Global trends indicate a gradual increase in the percentage of companies that have women on their boards, with 59% of companies reporting women board members, up from 56% in 2008. Seventeen percent of the companies analyzed report having a board consisting of 20% or more women (compared to 13% in 2008); 45% report boards of 10% or more women (compared to 39% in 2008). From a regional perspective, EMEA has the most women on corporate boards followed closely by Americas, whilst companies in the Asia Pacific region report having the least gender diverse boards. Sector trends indicate that companies within the technology, industrials and non-cyclical consumer goods and services sectors lead in having the most mixed boards, whilst healthcare companies have the least.

This study complements Thomson Reuters February 2012 “Women in the Workplace” analysis, which revealed that corporations were doing more to track the number of women they employ. Those corporations that recorded more women at managerial levels appeared to benefit from healthier share prices in times of market turmoil.

The report is to be welcomed, not just by the team here at Non Exec Hub, but by any enterprise concerned to deliver better organisational efficiency and business sustainability.

Heather White is CEO of Non Exec Hub. You can contact her at [email protected]

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