Study: More Women On Executive Boards Means More Money For Companies

Businesswoman laughing in meeting

A study to coincide with International Women’s Day has found that companies who have more women on their boards make more money than companies whose boards are male dominated. How’s that for empowerment on this particular day?

This research was carried out in Australia, by a group of people at La Trobe University Business School who examined roughly 300 of the top 500 ASX-listed companies down under between the years of 2005 and 2011. In wonderful news, the case for greater female representation in the upper echelons of business was crystal clear, as explained by the school’s head, Professor Paul Mather.

“We did find, as we expected, that there was a positive association between female non-executives on boards and firm financial performance,” he said.

“It’s not just about equity and social justice, it makes economic sense to have greater diversity on boards.”

Were their findings coincidental? Mather says no.

“There’s a simultaneous equation system which kind of allows you to test to see in fact whether it’s women on boards driving performance or whether it was just better performing firms that happened to pick women. Now it’s not to say this is an aggregated on average type of study, so that’s not to say that there won’t be isolated incidences where it’s a coincidence, but on average in the sample that’s what we found.”

Though we’ve still got a long way to go, Mather and his team noted that between 2005 and 2011, the proportion of women on these influential company boards had doubled from 6 to 12 per cent, which they put down to the effective implementation of gender diversity policies, which companies were forced to disclose from 2010 onwards. Today, 12% of the top 200 companies in Australia still have no women on their board, though whether or not the policy issue of gender quotas would be best posed to remedy this, they’ll have to delve a little deeper.

“Having the greater diversity that women bring is beneficial in economic sense — I mean the social justice arguments, equity etcetera is fairly clear. Quotas is a separate policy issue, I think there’s pros and cons about talking about quotas, potentially targets or taking the more softly softly approach that the ASX is taking, this study doesn’t get into that. My sense is personally, I think targets are a good thing — it just concentrates the mind and forces people to get this front of mind when they’re making hiring decisions.”

Do you feel gender quotas should be brought in?


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