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Firms With More Women on Boards Perform Better Than Those That Don’t

September 30, 2007
Related Topics: Career Development, Corporate Culture, Employee Career Development, Workforce Planning, Latest News
Companies with more women on their boards perform better than those with very few women, according to a study released on Monday, October 1, by Catalyst, a New York-based consultant.

During the four-year span of the reporting for the study, Fortune 500 companies with the highest percentage of women on their boards saw equity returns that were 53 percent higher than those companies with the fewest number of women on their boards.

These companies saw a return on sales that was 42 percent higher than those companies with the least number of women. Similarly, they saw a return on invested capital that was at least 66 percent higher.

“We have established a correlation between diverse boards and strong corporate performance,” says Kara Helander, vice president, Western Region at New York-based Catalyst.

The study also found that there seems to be a sharp uptick in performance for companies with at least three women on their boards. Return on equity for that group was 16.7 percent, compared with 11.5 percent for the average company. Return on sales was 16.8 percent, compared with 11.5 percent for other firms, and return on invested capital was 10 percent compared, with 6.2 percent for the average firm.

“This seems to indicate that getting beyond what many would call ‘tokenism’ appears to be leading to better decision-making and more insight into the workplace and marketplace,” Helander says.

It makes sense that companies with more women on their boards would perform better than those that don’t because these companies probably have a better handle on their customer base, says Dale Winston, CEO of Battalia Winston, a New York-based executive search firm.

Particularly consumer goods companies, which make up a large part of the Fortune 500 list, cater largely to women customers and thus want women on their boards, she says.

Also, having more women on their boards helps attract and retain women employees, says Constance Bagley, a visiting professor at the Yale School of Management. “If I were a top female graduate at one of the top business schools, I would feel that I would have a stronger career path at a company with more women on its board,” she says.

—Jessica Marquez

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