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Women On Boards: Still Lagging, Despite Compelling Evidence That They Raise Shareholder Returns…What’S Up Here?


A just-out study from index provider MSCI shows that companies with “strong female leadership”, which they define as companies that have three or more women on the board, or a female CEO and at least one other female board member, deliver a 36% higher return on equity.

The study analyzed the 1,643 companies that are covered by the MSCI World Index and found that organizations with “strong female leadership” scored an average 10.1% return on equity from the end of 2009 to September 2015, compared with 7.4% for companies without women at the most senior levels.

That represents an awful lot of extra money we say…way too much to ignore as mere “statistical noise”…or as maybe a “fluke.”

“Given the limited historical data, it cannot be clearly established why companies with stronger female leadership might demonstrate some superior financial characteristics,” the authors said in the report. “However, academic research in management and social psychology has long shown that groups with more diverse composition tended to be more innovative and made better decisions.”

The research also showed that companies with more women on their boards are less likely to be caught up in corporate scandals: Companies ranked in the bottom quarter in terms of gender diversity on their boards were hit by 24% more governance-related controversies than average…which do indeed tend to drag down returns…so more money is potentially on the table here too.

A previous study of companies in the U.S., U.K. and India by the accountancy firm Grant Thornton also found that companies perform better when they have at least one female executive on the board.

In Germany, a new law will ensure a minimum of 30% female representation on the boards of its largest companies by next year. Meanwhile, boards in Norway and France already surpass that number, while the U.S. - which initially pioneered the idea of adding women to the boardroom, way back in the ‘60s (see our article on Wilma Soss in the magazine section) is tied for 10th place…with Australia.

So what accounts for our lowly percentage ranking? And for our ridiculously low goal for 2020? It’s surely not a shortage of good candidates. If one looks, one can easily find literally thousands of highly qualified female business owners, CEOs and CFOs. And there are hundreds and hundreds of female Corporate Secretaries and Governance Officers and IR Officers, for example, who have valuable and much needed skill-sets to bring to boards - and lots of experience in board rooms besides. One could call it myopia, or maybe better, serious astigmatism…but most likely we think, it’s that using the “old boy network” - and being a “good old boy” - is still the number-one way to get into the boardroom.