Credit Suisse Research Confirms: Diverse Boards Mean Better Business

According to a new report from the Credit Suisse Research Institute, companies with more women on their boards perform better.

The report, which tracked 2,360 companies over six years, concludes:

“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.”

The survey states that large-cap firms with at least one woman on the board performed 26% better than those without. Small-cap firms performed 17% better. These numbers make a convincing case that gender diversity benefits a company’s bottom line.

The Credit Suisse report posits that companies with female board members have a better diversity of leadership skills, reflect a changing customer base, have improved corporate governance and are more risk-averse.

Women and Risk: Good Times and Bad

The risky practices by the banks and financial services institutions that triggered our current economic climate make the higher-levels of risk aversion women bring to the table extremely appealing.

However, equating women in senior leadership positions with an increase in risk-averse behavior can have a downside. The Financial Times writes:

“It is unclear whether investors should welcome women on to company boards so wholeheartedly once the business climate changes and the name of the game becomes risk-taking and growth.”

Katherine Phillips, the Columbia Business School professor who conducted the research featured in the Credit Suisse report, believes more women should be on corporate boards regardless of the current state of the economy. She says:

“Although some of the benefits of greater diversity in leadership may be more obvious now at a time of relative economic stress, we shouldn’t conclude diversity is not necessary when the situation reverses. It’s really about getting a balance in the room, to give the team the flexibility to respond appropriately depending upon the external environment.”

Investors Take Note: Diversity Adds Value

Though the number of women on the boards of financial institutions is still very low, things are changing for the better. Some 24% of new directors joining a financial services board in 2011 were women, a 6% increase over the 18% joining boards in 2010. But there is still a long way to go before gender balance in the boardroom is achieved.

In the press release announcing the Credit Suisse report, Stefano Natella, Co-Head of Securities Research & Analytics at Credit Suisse is quoted as saying:

“This in-depth study provides investors with striking evidence that greater gender diversity is a valuable additional metric to consider when evaluating investments. The results of our analysis are irrefutable and for the first time offer a global view of this topic and a compelling explanation of why gender diversity adds value.”

Once rating agencies begin to measure gender diversity against corporate performance in developing investment recommendations, gender balance among senior leadership positions will quickly become the new norm. Especially if that measurement coincides with increasing client insistence that financial institutions have a diverse board in order to win their business. Thanks to this new research by the Credit Suisse Research Institute, the clock on both may be ticking a bit faster this week than it was last.

If balanced boards result in better business, why are women still underrepresented? What can be done to get more women on boards?

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By |2018-02-12T19:24:36-05:00August 3rd, 2012|Better Balance, Gender Balance|Comments Off on Credit Suisse Research Confirms: Diverse Boards Mean Better Business

About the Author:

Ellen Kinlin is an internationally recognized recruiting specialist in Asset and Wealth Management. With nearly three decades of experience, her market expertise and global candidate base are the most comprehensive in the industry. In 2012, Ellen launched WE – Women Executives, a division of The Kinlin Company specializing in the recruitment of senior-level female executives in Asset & Wealth Management. Read More