Resources On Diversity & Boards
Putting more women on boards isn’t something nice to do. There’s a strong business case for more female participation starting early in the lifecycle of the companies we build.
- A growing body of research shows that having three women on a corporate board represents a “tipping point” in terms of influence, which is reflected in financial performance. Our analysis from last year looked at a snapshot of global companies in 2015 with strong female leadership, finding that they enjoyed a Return on Equity of 10.1% per year versus 7.4% for those without such leadership.
- This year, we analyzed U.S. companies over a five-year period (2011-2016). U.S. companies that began the period with at least three women on the board experienced median gains in Return on Equity (ROE) of 10 percentage points and Earnings Per Share (EPS) of 37%. In contrast, companies that began the period with no female directors experienced median changes of -1 percentage point in ROE and -8% in EPS over the study period (see below exhibits).
Source: MSCI ESG Research
The chart compares the five-year EPS performance of four groups of companies: 1) those that reached the “tipping point” of three women on the board in 2011; 2) those that had zero women on the board in 2011; 3) those that added any number of women between 2011-2016; and 4) those that lost any number of women between 2011-2016.
Source: MSCI ESG Research
The chart compares the median five-year ROE change (in percentage points) of four groups of companies: 1) those that reached the “tipping point” of three women on the board (WOB) in 2011; 2) those that had zero women on the board in 2011; 3) those that added any number of women between 2011-2016; and 4) those that lost any number of women between 2011-2016.
- Such superior performance from companies with at least three female board members may derive from better decision-making by a more diverse group of directors, as some studies hypothesize. But outperformance may also be tied to greater gender diversity among senior leadership and the rest of the workforce, which has been correlated with reduced turnover and higher employee engagement.
- Globally, we found that large multinational companies that had a critical mass of female directors tended to have more gender-diverse leadership teams and were more likely to have a female CEO. Such companies were also more effectively tapping available female talent supplies throughout the organization. Thus, the presence of at least three women directors may be seen as a doubly positive indicator: of a better-performing company and of a more functional organization overall. In short, having more women directors may lead to a virtuous cycle.
- Companies with the most women board directors (WBD) outperform those with the least on ROS by 16 percent. Companies with a sustained high representation of WBD, defined as those with three or more WBD in at least four or five years, significantly outperformed those with sustained low representation by 84 percent on ROS, by 60 percent on ROIC, and by 46 percent on ROE. Download the Report
- Boards in 2017 will face a wide range of pressures: political uncertainty arising from the surprise Trump and Brexit victories, an increasing global convergence of corporate governance norms led by institutional investors, and greater scrutiny of a company’s strategy for long-term value creation led by institutional investors and activists.
- 2016 continued the long-term trend in the SV 150 of increasing numbers of women directors and declining numbers of boards without women members as companies with at least one woman director went from 67.8% to 74%, with distribution ticking up. View the Report
- Evidence abounds about what works for identifying high-potential women, creating career opportunities for them, reinforcing those opportunities through senior sponsorship, and measuring and managing results. Download the Report
- The Peterson Institute for International Economics survey of 21,980 publicly traded companies in 91 countries found evidence that having women on a board and robust evidence that women in the C-level are associated with higher profitability. Download the Report
- 2015 is a significant tipping point for a European ecosystem that feels very different from that of 2010. Our collective challenge is to ensure that we are saying the same about 2020 in another five years’ time. By setting out where we are today in an unprecedented level of detail, we hope this study also helps to show the way to what’s next. Download the Report