A new global study released by Credit Suisse Research Institute has found higher stock prices, higher net income growth and lower net debt-to-equity ratios at companies with women on their boards. As recently reported by Bloomberg, according to the author of this report, “companies with women on boards really outperformed when the downturn came through in 2008…Stocks of companies with women on boards tend to be a little more risk averse and have on average a little less debt, which seems to be one of the key reasons why they’ve outperformed so strongly in this particular period.”
Increasing gender diversity in boardrooms is a complex issue, and must involve recruiting uniquely qualified female directors who bring a breadth of experience and insight to the boardroom. However, Credit Suisse Research Institute’s study gives new ammunition to investors and activist groups, which often cite enhanced corporate performance as a main argument in the promotion of board diversity. For example, after its initial public offering in February 2012, Facebook faced intense scrutiny from several groups due to its lack of female board representation. In a letter to Facebook, the California State Teachers Retirement System expressed dissatisfaction in the lack of gender diversity, stating that its disappointment was “particularly glaring in view of the fact that Facebook is going public at a time when there is clear evidence that companies with diverse boards perform far better than the companies with more homogeneous boards.” Facebook also received heavy criticism from the group 2020 Women on Boards, which aims to ensure that 20% of all directors are women by 2020. According to Ann Mulcahy, the former CEO and chairman of Xerox Corp. and a director at several other large publicly-traded companies, “
Over four months after its IPO, Facebook ultimately announced that it was naming its chief operating officer, Sheryl Sandberg, to its board of directors. However, those working to achieve greater gender parity in board rooms still have quite a bit of work ahead of them. In January 2012, Glass Lewis released its first annual Mind the Gap: Board Gender Diversity in 2011, where we found that 91% of S&P 500 companies had at least one woman on their board. However, we also found that women comprise only 16% of all directors at these companies. While it is encouraging that women play a part in the strategic decisions of the vast majority of major U.S. corporations, we are concerned that companies are not actively ensuring that there is significant female representation on their boards. As discussed in more detail in Mind the Gap, in 2011 fewer than 18% of newly proposed board candidates were female.
While there is clearly room for more progress to be made regarding board diversity, perhaps this new study, with its focus on the link between diversity and corporate performance – will serve as the impetus needed for further – and more substantial – progress.