How Stock Exchanges Can Advance Gender Equality

03/06/2017 10:09 am ET Updated Mar 06, 2017

Gender equality is a fundamental human right. It’s also a financial issue that investors are increasingly paying attention to. Why? Because companies that discriminate against half the population will not be as competitive as those that embrace what diversity brings to the bottom line.

More competent companies tend to make better investments. This insight, along with loads of practical advice and case studies, is summarized well in a new report from the PRI and Sustainable Stock Exchanges Initiative, “How Stock Exchanges Can Advance Gender Equality.”

The advice in the report is aimed at stock exchanges, which have an important role to play in supporting the needs of investors, as well as the progress of gender equality. “Studies by Morgan Stanley, McKinsey, EY, the International Monetary Fund and others repeatedly find that addressing gender equality will unlock trillions of dollars of currently unrealized investment value,” says the report. How can stock exchanges help realize that value?

The report outlines steps exchanges can take in four areas:

  • transparency and reporting
  • product offerings
  • policies, training and education
  • advocacy and partnerships

Gender equality is not just a social issue, it’s also an investment issue. Gender equality poses both risks and opportunities. Companies that treat women poorly may have to spend more time and effort to recruit and train new ones. For the 40 percent of jobs earning less than $50,000 per year, reports CBS, it can cost up to 20 percent of that annual salary to replace an employee. If things come to litigation, that too can be expensive; 10 percent of wrongful termination and discrimination settlements result in price tags of $1 million or more, and that does not include the cost of legal counsel.

On the opportunity side, however, there is abundant evidence that advancing women is positively and significantly correlated with better company financial performance. And that, in turn, is a good reason why stock exchanges should consider taking one or more of the actions the report suggests, starting with transparency.

“What gets measured gets managed.” The reason we say that is because it’s so true. If we want companies to really manage employees in a way that doesn’t penalize people for not possessing a Y chromosome, the first thing they should do is measure and report on the gender makeup of the workforce by job category.

It’s tough to address imbalances in opportunity, pay, and representation without basic information, and that’s a perfect role for exchanges that would help millions of investors.

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