Over the last decade, a shift has been taking place in boardrooms across the globe – to increase the participation of women. Norway established the first boardroom quota to ensure fair representation of both genders on boards. The growing list of countries following suit include India, Malaysia, Canada, France, Israel, South Africa, Australia, Belgium, and too many more to mention. The United States, United Kingdom, Germany, and Singapore also are encouraging a higher number of women in boardrooms though disclosures and other initiatives.1
Some suppose the reason for the phenomenon might be the result of a social responsibility initiative gone viral. However, we’re onto to something a bit more concrete than that:
Hiring qualified women into top slots simply makes good business sense.
And now we have the research to support it. Companies with women on boards are outperforming those with all-male boards by 26 percent over a six-year period. Net income for companies with women board members is about 14 percent over the same time frame. The figure is 10 percent for companies with only men in boardrooms.2 It’s said that diverse boards are more risk averse, tend to do better with managing debt, and are better at auditing when heightened scrutiny is warranted.3
Eve Ellis, a wealth adviser at Morgan Stanley, and her colleagues are taking note. They have set up a new portfolio called Parity, which only invests in companies that meet Morgan Stanely’s financial requirements and have at least three women on their boards.
Considering the research conducted by McKinsey, Catalyst, and Credit Suisse, as well as Pepperdine, Columbia, Northeastern, and Harvard University, Ellis believes that better parity makes companies more sound – more profitable.4
All of this marks an important turning point in the gender diversity discussion. It’s no longer about proving the point for more diverse C-suites. The imperative is now clear. It’s time to turn our attention toward the strategies to get there. Toward the outcomes, the challenges – for there will always be challenges – and best of all, the milestones.
1. The Deloitte Global Center for Corporate Governance. Women in the boardroom:
A global perspective. 2013. Available at http://www.corpgov.deloitte.com/binary/com. Accessed August 6, 2013.
2. Credit Suisse Research Institute. Gender Diversity and Corporate Performance. 2013. Available at http://www.fortefoundation.org/site/DocServer/cs_women_in_leading_positions_FINAL.pdf?docID=17902. Accessed August 5, 2013.
3. Bloomberg. Stocks Perform Better if Women Are on Company Boards. Available at http://www.bloomberg.com/news/2012-07-31/women-as-directors-beat-men-only-boards-in-company-stock-return.html. Accessed on August 6, 2013.
4. The Corporate Social Responsibility Newswire. Women Leadership vs. Financial Performance: Morgan Stanley’s Eve Ellis Makes a Connection. Available at http://www.csrwire.com/blog/posts/951-women-leadership-vs-financial-performance-morgan-stanley-s-eve-ellis-makes-a-connection#sthash.aX03xC6u.dpuf. Accessed August 2, 2013.