Boards with female presence have better corporate governance and mix of leadership skills
Companies with at least one woman on the board of directors outperformed companies with all-male boards for the past six years in share price gains, according to a report by the Credit Suisse Research Institute.
Companies with a market capitalization exceeding $10 bn with mixed-gender boards outperformed those with all-male boards by an average 26 percent over the past six years, based on a like-for-like comparison, according to the study of more than 2,400 companies.
For stocks with a market cap of less than $10 bn, mixed-gender boards outperformed all-male boards by 17 percent. The study concludes that the advantage of mixed-gender boards became clearer in the tougher markets since 2008 and had minimal impact in 2007 and earlier.
‘Stocks with greater gender diversity on their boards generally look defensive: they tend to perform best when markets are falling, deliver higher-than-average returns on equity through the cycle, exhibit less volatility in earnings and typically have lower gearing ratios,’ Credit Suisse analysts write in a note explaining the study.
‘Almost all of the outperformance in the back-test has been delivered post-2008, as the macro environment deteriorated and volatility increased.’
Stocks with females on the board also showed a 16 percent return on equity, compared with 12 percent for all-male boards, the report adds. Net income growth for stocks with mixed-gender boards was 14 percent over the six years, compared with 10 percent for single-gender boards.
The report concludes that the enhanced performance of mixed-gender boards could stem partly from improved corporate governance in relation to all-male boards and partly from a better understanding of women as consumers.
It also notes that the number of women graduating from university is increasingly greater than the number of men, so gender diversity gives boards a much wider choice of candidates.
In addition, women are ‘particularly good at defining responsibilities clearly as well as being strong on mentoring and coaching employees,’ the study points out, citing supporting academic research. This could help companies develop a better mix of leadership skills, it concludes.
‘The outperformance of stocks with women on the board may not continue if the world shifts back toward a more stable macro-environment in which companies are rewarded for adopting more aggressive growth strategies,’ the report says.
Analysis of MSCI ACWI Index stocks also shows the number of boards with at least one female member increased to 59 percent at the end of 2011 from 41 percent at the end of 2005.
The fastest rate of change comes from Europe, where the number of boards with female representation rose to almost 84 percent at the end of 2011 from less than 50 percent at the end of 2005.
The Credit Suisse study shows that boards of companies in the IT sector are the most likely to include no women, with 52.5 percent of the boards being all male.
The healthcare sector is the least likely to be all male, with just 26.7 percent including no women.
But 22.5 percent of boards in the consumer staples sector include three or more women, making it the sector most likely to have boards with multiple women.
