Why do companies with gender diverse boards perform better?
As the portfolio manager of a strategy which seeks to benefit from this fact,* I am often asked this question by investors who think there must be one holy grail answer. They even seem ready to boast validation if their analysis matches mine or seems better than mine.
The truth is...there isn't one answer. Rather, there are multiple answers.
But don't take my word for it.
Listen to board members themselves.
University of Washington Adjunct Professor, Cate Goethals, and Global Management Consultant, Susan Bloch, conducted a study, "Better Boards Project" (December 2014), in which they surveyed 102 boards members, male and female, from around the globe, on their opinions and observations.
Goethals and Bloch's study provides a compelling link between characteristics of effective boards and contributions women bring to boards.
The authors asked directors to name the top five characteristics of highly effective boards. Here's the breakdown:
The Right Culture 58%
The Right Composition 55%
Good Governance/Compliance 53%
Good Relationship with Management 52%
Strategic Thinking 49%
Good Communications 46%
Diversity of Directors 40%
According to the directors in the study, women contribute the following:
Better Quality of Debate
More Focus on Human Factors
Accountability/Work Ethic
Behavior Change in Men
One male respondent remarked, "When women walked into the room, things changed both in demeanor and substance. We became more circumspect, more balanced, professionally. There was just no more old boy school stuff."
We may tread on stereotyping female and male behavior, but the important thing to remember is that something happens when women (plural) are in the room as decision-makers. And for shareholder value (as well as fairness), that's a good thing.
Feel free to weigh in--
Why do you think companies with gender diverse boards perform better?
*sample research supporting this: Catalyst. The Bottom Line, 2011. (Specifically, companies with three or more women on their board averaged 46% higher return on equity, 60% higher return on invested capital, and 84% higher return on sales.)