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Women on board: Firms with female directors do better, study says

August 01, 2012|By Tiffany Hsu

Need a balance sheet boost? Try adding some women to the board of directors.

Public companies with female board members do better than those without them, according to a new report from the Credit Suisse Research Institute.

The report, which measured 2,360 businesses worldwide over the last six years, concluded that companies with one or more women on the board have delivered higher average returns on equity, superior share price performance and better growth.

Large firms with at least one woman on the board performed 26% better than those without, according to the survey. There’s a 17% gulf between small and mid-size companies with female board representation and those without.

Net income growth for companies guided in part by women has averaged 14%, compared to 10% for those with no female board representation. The study suggests that women leaders may bring a more diverse mix of leadership skills, a deeper understanding of customers, improved corporate governance and a more risk-averse outlook.

Female directors are winning more board seats, with roles at 86% of U.S. companies last year. That’s up from 73% of companies with at least one female director in 2005. One national campaign aims to boost women to 20% of U.S. company boards by 2020.

The global percentage has gone up to 59% from 41% over the same period. In countries such as South Africa, Norway, France and Denmark, more than nine in 10 companies have female board members. Just 11.2% of Japanese companies and 3.8% of South Korean ones can say the same.

In the last five years, seven countries have passed laws mandating female board representation and eight have set suggested targets.

A separate report from research group GMI Ratings found gender diversity on corporate boards sorely lacking – with only 8% featuring three or more women out of an average 8.8 members. The Midwest leads with the most women, followed by the West and South regions.

More than half of Texas companies have no women on their boards. In Connecticut, 15% of boards feature at least three female directors. Consumer-focused firms have the most women leaders; energy companies have the least.

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