Want to give your company the best possible chance of outperforming its rivals? Then make sure you have women on the board as well as men.
That’s the conclusion of research published today by Credit Suisse. It looked at the performance of 3,000 companies around the world over the past two years and concluded that those businesses with at least one woman on the board outperformed those with no women by an average of 5%.
Companies with female board members were also likely to pay higher dividends to shareholders, Credit Suisse concluded.
“The research provides striking evidence: higher returns on equity, higher price/book valuations and higher pay-out ratios,” says Stefano Natella, Credit Suisse’s head of global equity research. “We also found that greater diversity, along with female CEOs, tend to mean higher leverage, in stark contrast to the generally accepted association of women and financial conservatism.”
If it’s not a counter-balancing prudence that women are bringing to these high-performing businesses, what is that makes the difference? That’s not a question that the Credit Suisse report answers, but there are likely to be a number of factors. Above all, companies that are run by groups of people with a more diverse range of perspectives stand a better chance of seeing the bigger picture – and capitalising on it.
That applies to companies of all sizes. While the Credit Suisse report focuses on large stock market-listed businesses, its findings are just as relevant to smaller enterprises. Other studies have seen the same results replicated in just about every area of commerce.
So does this mean governments should adopt legally-binding quotas, forcing companies to ensure that a certain number of their board members are female?
This has been the approach of a number of countries, particularly in Europe, where the European Commission is now considering whether to impose board quotas on companies across all its member states.
However, Credit Suisse argues that quotas inevitably leave companies focused purely on the number of women they have on their boards, rather than ensuring that their organizations are diverse throughout their length and breadth.
“Male-led management teams who hit their quota may then believe that all gender issues are solved and ignore the substantially larger problems they have in gaps in female representation throughout their management structure,” Natella adds. If so, many of the advantages of having women well-represented in senior positions in the company may be lead.
Instead, Credit Suisse urges companies to take all the steps they can to ensure women have every opportunity to progress through their organisations – from introducing family-friendly working practices for all staff to ensuring that men and women receive equal pay.
These are certainly lessons that smaller businesses can adopt as they grow. Smaller employers sometimes struggle to comply with the burdens of regulation and compliance, but they’re closer to their workforces and have more chance of successfully making changes to working practices.
This article was written by David Prosser from Forbes and was legally licensed through the NewsCred publisher network.