Why Women? The Business Case is Solid.

Why does it make good sense to have gender diversity on any corporate board?  The business case is compelling.

Warren Buffet

Fellow males, get onboard. The closer that America comes to fully employing the talents of all its citizens, the greater its output of goods and services will be. We’ve seen what can be accomplished when we use 50% of our human capacity. If you visualize what 100% can do, you’ll join me as an unbridled optimist about America’s future.”

Warren Buffett, Fortune, May 2, 2013

Better financial performance.

ROE Credit SuisseCredit Suisse’s Gender Diversity and Corporate Performance report in 2013 found that “in testing the performance of 2,360 companies globally over the last six years, our analysis shows that it would on average have been better to have invested in corporates with women on their management boards than in those without. We also find that companies with one or more women on the board have delivered higher average returns on equity, lower gearing, better average growth and higher price/book value multiples over the course of the last six years.”

 

 

 

A Catalyst Study in 2011 reported:

  • Companies with the most women board directors (WBD) outperform those with the least on ROS by 16%.
  • Companies with the most WBD outperform those with the least on ROIC by 26%.
  • Companies with sustained high representation of WBD, defined as those with three or more WBD in at least four of five years, significantly outperformed those with sustained low representation by 84% on ROS, by 60% on ROIC, and by 46% on ROE.

Illuminate Ventures reported in 2014 that the average venture-backed company run by a woman had annual revenues that were 12%  higher than those run by men and used an average of one-third less capital.

University of British Columbia  did an analysis of all of the mergers and acquisitions activities of S&P 1500 companies between 1997 and 2009 which showed that corporate boards with women on their boards strike better M&A deals.  The report found that each female director present on a company’s board meant it spent 15 % less on acquisition bid premiums.

McKinsey & Co Women Matter reports from 2007-2015 have made a strong case for diversity in boards and executive management:

mckinsey

2007 – Demonstrated a link between a company’s performance and the proportion of women serving in its governing body.

2008 – Identified the reasons for this performance effect by examining the leadership styles that women leaders typically adopt.

2009 – Surveyed 800 business leaders worldwide which confirmed that certain leadership behaviors typically adopted by women are critical to perform well in the post-crisis world.

2010 – Companies with top-quartile representation of women in executive committees perform significantly better than companies with no women at the top.

2015 – McKinsey’s Diversity Matters report states “Companies in the top quartile for gender diversity are 15% more likely to have financial returns above their respective national industry medians.”

A 2015 Grant Thornton research report shows a staggering $567 billion opportunity cost associated with the male-only boards in S&P 500 companies in the U.S. The average ROA  is 1.9% lower for these U.S. companies.  And, this translates to a 3.5% GDP opportunity cost.

In 2011 the non-profit research organization, Reibey Institute, found that over three and five year periods, ASX500 (Australian Stock Exchange) companies with women directors delivered significantly higher return on equity (ROE) than those companies without any women on their boards:

  • 6.7 % higher over a 3 year period.
  • 8.7% higher over a 5 year period.

Different perspectives and leadership styles.

Brains half and halfWomen bring different perspectives to the complex issues facing today’s global businesses. It is widely believed that diversity of thought results in better decision making. Good   corporate decision-making requires the ability to hear and consider different points of view, which come from people who have different backgrounds, experiences, and perspectives.

Women and men board members approach some key governance issues differently.  Fortune magazine reports on a 2014 PwC study of 900 board members of companies with $1 billion plus in revenues across almost two dozen industries found that women:

  • Are more likely than their male peers to say that getting rid of directors who aren’t pulling their weight should be easier than it is now
  • Would like additional board focus on technology risks, including cybersecurity.
  • Expect more thorough briefings from management. Female directors are more than twice as likely as their male peers to say they’re “dissatisfied” with the explanations they do get.
  • Want to know more about customer and employee satisfaction.
  • Want to adopt more of the policies viewed as “leading” by activist shareholders and others such as mandatory board retirement policies in place, raising the minimum amount of stock directors must own and limiting board members’ terms.

Companies that invest in gender diversity at high levels are less likely to fall prey to fraud, corruption, and other scandalous episodes and fewer governance-related controversies, according to a 2015 analysis by MSCI Inc.

Aaron A. Dhir, an associate professor at York University’s Osgoode Hall Law School and Researcher at Yale Law School, has done extensive research for his 2015 book, Challenging Boardroom Homogeneity: Corporate Law, Governance and Diversity.  He found a number of positive results of gender-based diversity for boardroom work including:

  • Enhanced dialogue.
  • Better decision making, especially around the value of dissent.
  • More effective risk mitigation and crisis management.
  • Higher quality monitoring of and guidance to management.
  • Positive changes to the boardroom environment and culture.
  • More orderly and systematic board work. 

Mirror your employees and customers.

Companies that adhere to the virtues of diversity and gender balance in staffing can claim the high ground if board membership is consistent with this mandate.   The changing demographics of more women in the workplace and their marketplace buying power mandate that boards see from their view point.

Untapped market.

There is a huge, untapped source for qualified board members in women with the skills and experience that most boards need, including industry knowledge, operational experience, and functional expertise.

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