Stocks Perform Better if Women Are on Company Boards

<strong>Stocks</strong> <strong>Perform</strong> <strong>Better</strong> <strong>if</strong> <strong>Women</strong> <strong>Are</strong> onCompany BoardsBy Heather Perlberg on July 31, 2012Companies with women on their boards performed better in challenging markets than those withall-male boards in a study suggesting that mixing genders may temper risky investment movesand increase return on equity.Shares of companies with a market capitalization of more than $10 billion and with womenboard members outperformed comparable businesses with all-male boards by 26 percentworldwide over a period of six years, according to a report by the Credit Suisse ResearchInstitute, created in 2008 to analyze trends expected to affect global markets.The number of women in boardrooms has increased since the end of 2005 as countries such asNorway instituted quotas and companies including Facebook Inc. (FB) (FB) added femaledirectors (FB) after drawing criticism for a lack of gender diversity. The research, which includesdata from 2,360 companies, shows a greater correlation between stock performance and thepresence of women on the board after the financial crisis started four years ago.“Companies with women on boards really outperformed when the downturn came through in2008,” Mary Curtis, director of thematic equity research at Credit Suisse in Johannesburg and anauthor of the report, said in a telephone interview. “<strong>Stocks</strong> of companies with women on boardstend to be a little more risk averse and have on average a little less debt, which seems to be oneof the key reasons why they’ve outperformed so strongly in this particular period.”Risk AversionNet income growth for companies with women on their boards has averaged 14 percent over thepast six years, compared with 10 percent for those with no female director, according to theCredit Suisse study, which examined all the companies in the MSCI ACWI Index. (MXWD) Thenet-debt-to-equity ratio at companies with at least one female director was 48 percent, comparedwith 50 percent at all-male boards, and the study showed a faster reduction in debt at businesseswith women on the board as the financial crisis and global economic slowdown unfolded.While female representation increased to 59 percent last year from 41 percent at the end of 2005,countries such as Japan and South Korea are lagging behind the U.S. and Europe, which hasadded female representation the fastest over the six-year period.Larger companies have a higher proportion of women on their boards, as well as those in thehealth-care industry -- 73 percent have at least one female director -- and industries close toconsumers, the study shows.

Health-care and consumer companies “are slightly more defensive companies anyway, but evenwithin that we found that stocks in the health-care sector and the consume-staples sector, whichhad some level of gender diversity on the board, were generally outperforming their peer group,”Curtis said.Not PromotedThe materials and information-technology sectors have the highest percentage of male-onlyboards, both at more than 52 percent, according the report.“Traditionally some industries have just never really been seen as the domain of a woman, likesome of the mining industries or heavy-capital goods industries,” Curtis said. “<strong>Women</strong> haven’tgenerally been promoted through the ranks of those industries and then made it up to boardlevel.”The group 2020 <strong>Women</strong> on Boards, which is pushing for 20 percent female directors by 2020,has ident<strong>if</strong>ied more than 200 companies that lack a single woman on their board, includingSarasota, Florida-based Roper Industries Inc. (ROP) (ROP)Female CandidatesWhile Roper Industries, which makes engineering products for the water, energy, transportationand medical industries, doesn’t have an open slot for a director, the company is “more thanwilling to consider female candidates for the board and would be anxious to find one that wouldfit in,” Chief Executive Officer Brian Jellison said in a telephone interview.In the U.S., 36 percent of companies still have no women on their boards of directors, accordingto a report by researcher GMI Ratings on gender diversity released today. The average corporateboard has about nine members.“Multiple academic studies have concluded that diverse corporate boards exercise more diligentoversight,” Michelle Lamb, author the study, said in a report. “They have better attendancerecords than homogeneous boards, and they invest more effort in auditing when the complexityof the business warrants heightened scrutiny.”Facebook, the world’s largest social networking service, based in Menlo Park, Cal<strong>if</strong>ornia,appointed Chief Operating Officer Sheryl Sandberg as its first female director about a monthafter its May initial public offering.To contact the reporter on this story: Heather Perlberg in New York at hperlberg@bloomberg.netTo contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net