Women on Board - Improve Profits

Companies With More Women Board Directors Experience Higher Financial Performance

Fortune 500 companies with the highest representation of women board directors attained significantly higher financial performance, on average, than those with the lowest representation of women board directors, according to Catalyst’s most recent report, The Bottom Line: Corporate Performance and Women’s Representation on Boards. In addition, the report points out, on average, notably stronger-than-average performance at companies with three or more women board directors.

The study, which is the second of Catalyst’s Bottom Line reports, looked at three critical financial measures: return on equity, return on sales, and return on invested capital, and compared the performance of companies with the highest representation of women on their boards to those with the lowest representation.

“Clearly, financial measures excel where women serve on corporate boards,” said Ilene H. Lang, President of Catalyst. “This Catalyst study again demonstrates the very strong correlation between corporate financial performance and gender diversity. We know that diversity, well managed, produces better results. And smart companies appreciate that diversifying their boards with women can lead to more independence, innovation, and good governance and maximize their company’s performance.”

The report found higher financial performance for companies with higher representation of women board directors in three important measures:

Return on Equity: On average, companies with the highest percentages of women board directors outperformed those with the least by 53 percent.
Return on Sales: On average, companies with the highest percentages of women board directors outperformed those with the least by 42 percent.
Return on Invested Capital: On average, companies with the highest percentages of women board directors outperformed those with the least by 66 percent.
The correlation between gender diversity on boards and corporate performance can also be found across most industries—from consumer discretionary to information technology.

The study was sponsored by The Chubb Corporation. It follows Catalyst’s 2004 Bottom Line report on the correlation between the percentage of women corporate officers and a company’s financial performance.

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About this Study
The findings in this study were based upon the four-year average for ROE, ROS, and ROIC for 2001, 2002, 2003, and 2004, and women board director (WBD) data for 2001 and 2003. Financial data for the companies examined were obtained from the Standard & Poor’s Compustat database. Because of movement into and out of the Fortune 500 each year, there are 520 companies in this analysis; the top quartile comprises the 132 companies with the highest percentages of women board directors while the bottom quartile comprises the 129 companies with the lowest percentages of women board directors. WBD data was obtained from the 2003 Catalyst Census of Women Board Directors and the 2001 Catalyst Census of Women Board Directors. Financial performance measures vary by industry. To account for this variability, standardized financial performance measures were used to make comparisons within the overall sample.
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About Catalyst
Founded in 1962, Catalyst is the leading nonprofit corporate membership research and advisory organization working globally with businesses and the professions to build inclusive environments and expand opportunities for women and business. With offices in New York, San Jose, Toronto, and Zug, and the support and confidence of more than 340 leading corporations, firms, business schools, and associations, Catalyst is connected to business and its changing needs and is the premier resource for information and data about women in the workplace. In addition, Catalyst honors exemplary business initiatives that promote women’s leadership with the annual Catalyst Award
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Source: http://www.catalyst.org/pressroom/press_bottom_line_2.shtml


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