Kimberly Gladman, Ph.D., CFA, Director of ResearchThe recent Credit Suisse report about women on boards (Gender diversity and corporate performance, August 2012) takes the discussion of gender and company performance to a new level. For years, there have been reports claiming to link gender diversity to improved operational or stock price performance, but many of them have been criticised for methodological flaws such as not controlling for industry or size, or having samples that are regionally limited or cover short time frames.
The Credit Suisse report carefully controls for both market-cap and sector, and examines a broad sample of companies—the MSCI ACWI—over a six-year period (December 2005-December 2011). The rigour of this approach should help to build confidence in the report’s conclusions, which are striking: among large-cap companies (those with market cap over $10 billion), those with women on the board outperformed those with all-male boards by 26% on average over that time period, and the comparable figure for small-to-mid-cap stocks was 17%.
Strikingly, almost all the outperformance came from the post-financial-crisis period. This suggests that the gender diversity may look irrelevant in good times, but proves invaluable when the going gets tough.
The study should prove thought provoking at many levels. Countries like the US and UK, which view themselves as economic leaders, may want to consider improving their middle-of-the pack ranking on gender diversity.
As GMI Ratings’ 2012 Women on Boards report demonstrated, only 10.7% of UK directors and 12.6% of US directors are women, fewer than in Canada, Germany, France, Australia, all the Nordic countries, and South Africa).
In addition, certain industries may want to address their relative dearth of female directors: as another GMI Ratings publication showed earlier this year, within the Russell 3000, 61% of energy companies, 55% of telecommunications firms, and 49% of IT companies have no women on their boards at all (compared to an average across all industries of 36% all-male boards).
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