Women as directors beat men-only boards in company stock return

Companies with women on their boards performed better in challenging markets than those with all-male boards in a study suggesting that mixing genders may temper risky investment moves and increase return on equity.

Shares of companies with a market capitalization of more than $10 billion and with women board members outperformed comparable businesses with all-male boards by 26 percent worldwide over a period of six years, according to a report by the Credit Suisse Research Institute, 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 as Norway instituted quotas and companies including Facebook added female directors after drawing criticism for a lack of gender diversity. The research, which includes data from 2,360 companies, shows a greater correlation between stock performance and the presence 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 in 2008,” said Mary Curtis, director of thematic equity research at Credit Suisse in Johannesburg and an author of the report. “Stocks of companies with women on boards tend to be a little more risk averse and have on average a little less debt, which seems to be one of the key reasons why they’ve outperformed so strongly in this particular period.”

Net income growth for companies with women on their boards has averaged 14 percent over the past six years, compared with 10 percent for those with no female director, according to the Credit Suisse study, which examined all the companies in the MSCI ACWI Index. The net-debt-to-equity ratio at companies with at least one female director was 48 percent, compared with 50 percent at all-male boards, and the study showed a faster reduction in debt at businesses with 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 has added 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 the health-care industry — 73 percent have at least one female director — and industries close to consumers, the study shows.

Health-care and consumer companies “are slightly more defensive companies anyway, but even within that we found that stocks in the health-care sector and the consume-staples sector, which had some level of gender diversity on the board, were generally outperforming their peer group,” Curtis said.

The materials and information-technology sectors have the highest percentage of male-only boards, both at more than 52 percent, according the report.

“Traditionally some industries have just never really been seen as the domain of a woman, like some of the mining industries or heavy-capital goods industries,” Curtis said. “Women haven’t generally been promoted through the ranks of those industries and then made it up to board level.”

The group 2020 Women on Boards, which is pushing for 20 percent female directors by 2020, has identified more than 200 companies that lack a single woman on their board, including Sarasota, Fla.-based Roper Industries.

While Roper Industries, which makes engineering products for the water, energy, transportation and medical industries, doesn’t have an open slot for a director, the company is “more than willing to consider female candidates for the board and would be anxious to find one that would fit in,” Chief Executive Officer Brian Jellison said in a telephone interview.

In the United States, 36 percent of companies still have no women on their boards of directors, according to a report by researcher GMI Ratings on gender diversity released Wednesday. The average corporate board has about nine members.

“Multiple academic studies have concluded that diverse corporate boards exercise more diligent oversight,” Michelle Lamb, author the study, said in a report. “They have better attendance records than homogeneous boards, and they invest more effort in auditing when the complexity of the business warrants heightened scrutiny.”