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Gender diversity in boardrooms improves financial performance

Firms with mixed-gender boards outperform those with male-only boards

13 July 2013

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By Manju Manglani, Editor (@ManjuManglani)

The average stock price of gender-diverse corporate boards outperforms that of boards with no women.

That’s according to the whitepaper Mining the Metrics of Board Diversity, which is based on an analysis of the level of gender diversity on corporate boards across 4,100 public companies globally.

It found that companies with no women on their boards underperformed relative to gender-diverse boards and had slightly higher tracking errors, indicating potentially more volatility.

"Gender equality in the workplace makes good investment and business sense," said André Chanavat of Thomson Reuters, who co-authored the white paper with Katharine Ramsden.

"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.”

The research found that indices of companies with mixed-gender boards have, on aggregate, marginally better or very similar performance to a reference benchmark. Companies with no women on their boards underperformed, on average, relative to gender-diverse boards.

Local legal requirements appear to have had the greatest impact on the adoption of company policies to improve gender diversity.

The adoption of policies and processes to promote gender diversity and equal opportunities increased from 64 per cent in 2008 to 66 per cent in 2012 among the companies studied.

Global trends indicate a gradual increase in the percentage of companies that have women on their boards, with 59 per cent of companies reporting the existence of female board members, up from 56 per cent in 2008.

However, only 17 per cent of the companies analysed reported having a board consisting of 20 per cent or more women (up from 13 per cent in 2008). Just under half (45 per cent) reported having boards with 10 per cent or more women (up from 39 per cent in 2008).

From a regional perspective, the study found that companies in EMEA had the most women on their boards, followed closely by the Americas, while companies in the Asia-Pacific region had the least gender-diverse boards.

Earlier this year, Lucy Scott-Moncrieff, president of the Law Society of England and Wales, said law firms were letting “mediocre” men dominate their boardrooms because they were failing to adopt “modern flexible working practices”.

“It is not enough to merely pay lip service to the benefits of flexible working. It is not acceptable to consider women who take advantage of flexible working practices as somehow lacking commitment.

“The risk is that boardrooms will be full of men, only some of whose talent warrants their senior positions.

“Unwittingly, these firms may be losing talented women and promoting mediocre men.”

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