Female directors’ help firms perform better

  2nd August 2012      
 Company News, Recruitment

Facebook announced their new female board member at the end of last year.

Research carried out by The Credit Suisse Research Institute, over the last six years, has found that firms with women on their boards have consistently outperformed those led by only male directors. It is claimed that this “proves the business case” for greater numbers of female directors.

Having measured the share price performance of 2,360 companies, globally over the past six years, the researchers concluded that on average it would “have been better to have invested in corporates with women on their management boards than in those without”.

The results showed that companies with at least one woman on their board produced a 16% return on equity, 4% higher than firms with no female board members. Furthermore companies with a diverse board saw a turnover increase of 14%, 4% higher than those boards without women.

The results were weighted to account for sector-bias, and split into two categories for large and small businesses. Whilst the effect of women board-members was more pronounced in larger companies, “both sets showed a clear outperformance by the gender-diverse group.”

Currently the number of women on boards stands at 16.7 per cent, up from 12.5 per cent a year ago, due in part to the work of the Lord Davies review. The Credit Suisse research shows that Europe is improved its gender diversity at the fastest rate, while Asian markets, both emerging and developed, have lagged behind. The exception was China, which has made great strides in recent years, moving from just 6.5 per cent of firms with at least one female board member in 2005 to 50 per cent in 2011.

Researchers pointed to several key reasons why greater gender diversity correlated with stronger corporate performance, which included greater effort across the board, a better mix of leadership skills, access to a wider pool of talent and better reflection of the consumer.

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