The Effect of Women on Boards

Here’s a fact: diverse boardrooms and executive offices return higher revenues and depict increased innovative thinking when compared to firms lacking diversity. A recent report from MSCI ESG Research surveying 4,218 companies around the world found that those with numerous female executives and board members represented a Return of Equity of 10.1 percent a year compared to 7.4 percent for companies without significant female leadership.

The study identifies strong female leadership if a company has three or more women on their board, its percentage of women boardroom members is above the country average or it has a female CEO and one or more women boardroom members.

Why do companies practicing gender diversity in leadership roles perform better? Of this, MSCI remains unsure, stating, “MSCI ESG Research’s analysis does not posit a causal link between women in leadership positions and corporate performance. Given the limited historical data, it cannot be clearly established why companies with stronger female leadership might demonstrate some superior financial characteristics.” Even though it is not clear why gender diverse leadership groups outperform those that are male-dominated, it is true.

Report Findings:

• American companies are more likely to appoint a female CEO or CFO
• Women hold 19.1 percent of directorships among American MSCI World Index companies
• Companies without boardroom diversity experience more government-related controversies than average
• 16.9 percent of MSCI USA Index companies had a female CEO or CFO as of August 15, 2015; among non-U.S. companies, this figure was 11.4 percent
• MSCI World companies with a female CEO were more likely to have multiple women on their boards
• Female directors lack equal C-Suite experience as men, but women surpass men in regards to advanced educational degrees
• Among American MSCI World Index companies, women hold 936 director positions out of a possible 6,267 boardroom seats at 591 companies

To read more about MSCI ESG Research’s report, please click here.