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Companies with female board members outperform those with none

Companies with at least one female board member returned 26 per cent more than companies with none.

Sarah Nic Lochlainn from Aruna Sauces in Louth and Fiona Leahy, County and City Enterprise Boards at the launch of Women's enterprise day last month.
Sarah Nic Lochlainn from Aruna Sauces in Louth and Fiona Leahy, County and City Enterprise Boards at the launch of Women's enterprise day last month.
Image: Leon Farrell/Photocall Ireland

LOOKING TO INVEST in a company that won’t fail? Then pick one with female board members, says a new study by Credit Suisse.

Analysing the performance of almost 2400 companies with and without female board members, the Swiss bank found that companies with at least one female board member outperformed those with none over the past six years. How much better did they do? Looking at the performance of the share prices alone, they performed 26 per cent better.

“They tend to perform best when markets are falling, deliver higher average Return on Equities through the cycle, exhibit less volatility in earnings and typically have lower gearing ratios,” said the study.

In other words, when the sky is falling on our heads and you’re looking for a safe haven for your investments, its worth looking for companies with female board members. But why does greater gender diversity lead to better performance? Credit Suisse offer a few pointers.

  1. A signal of a better company There is a body of research that suggests that appointment of women to the board is a sign that the company is already doing well rather        than a signal of greater things to come.
  2. Consumer Insight Women make most of the decision in the home regarding household spending.
  3. Greater Effort Across the Board Evidence suggests that greater team diversity (including gender diversity) can lead to better average performance. Research conducted       by Professor Katherine Philips at Columbia University has shown that majority groups improve their own performance in response to             minority involvement producing better average outcomes in more diverse environments.
  4. A Better Mix of Leadership Skills
    McKinsey and NASA have conducted various studies on leadership skills and have shown that women are particularly good at defining responsibilities clearly as well as being strong on mentoring and coaching employees.
  5. Access to a Wider Talent Pool
    Data from UNESCO shows that by 2010, the proportion of female graduates across the world came to a median average of 54 percent.

The study is the latest in a number of pieces of research that look at how women and men do business differently and the effect that this had on the performance of companies. Testosterone levels give male stockbrokers an edge, it has been suggested, but this has also contributed to the recession is has been argued elsewhere.

59 percent of global stocks on the MSCI World Index now have women on their boards. This is up from 41 percent in 2005.

Women are less likely to set up their own business than men>

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