Increased participation of women in top management positions should not be seen as an exercise in public image and reputation building. Research has consistently shown that having more women in senior positions and board of directors has a positive impact on a company’s financial performance and improves market returns for the investors.
MSCI has now published its 2016 Women on Board Report called The Tipping Point: Women on Boards and Financial Performance, which further reinforces the belief in the financial advantages gained by gender-diverse companies.
MSCI analyzed US companies over a five-year period from 2011 to 2015, and found that companies that started the period with at least three women on the board experienced median gains in Return on Equity (ROE) of 10 percent and Earnings Per Share (EPS) of 37 percent.
In contrast, companies that began the period with no women directors experienced a negative median change in ROE of one percent and a negative EPS of eight percent over the same period.
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. 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, the MSCI study found that large companies that had a critical mass of women directors, tended to have more gender-diverse leadership teams and were more likely to have a woman CEO. Such companies also more effectively tap available female talent throughout the organization.
According to the study, women achieved incremental gains in filling board seats at companies around the world in the past year, with the greatest percentage increase occurring in emerging markets. Among MSCI ACWI Index constituents, 75 percent had at least one female director as of September 2016, up from 72 percent in 2015.
The MSCI research also revealed that while the number of women CEOs remains low among global companies, women Chief Financial Officers (CFOs) are much more common. Among MSCI ACWI Index constituents, 3.6 percent had a woman CEO as of September 2016, while 8.2 percent had a woman CFO. In the US, the number of women CFOs grew to 13.3 percent in 2016 from 12.2 percent in 2015.
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