Companies that embrace diversity make better investments
Companies with a greater number of women on boards tend to show higher levels of productivity growth, return on equity and dividend payouts, according to survey results by ratings provider MSCI.
Just over 17% of board seats for companies in the MSCI ACWI Index were held by women. This happens more commonly in certain sectors – notably consumer discretionary, consumer staples and industrials sectors and the banking industry.
The study divided companies into ‘talent leaders’ and ‘talent laggards’. ‘Talent leaders’ tended to have a greater number of women on boards. A higher number of female directors seemed to indicate a higher level of attention to talent management. At the same time, companies with few or no women on the board saw lower employee productivity.
Some investment groups have launched gender ETFs. The Lyxor Global Gender Equality ETF and the SPDR SSGA Gender Diversity Index ETF (SHE) invest in companies with a good track record on equality. The Solactive Equileap Global Gender Equity Index has outpaced the MSCI World by around 12% over the past five years.
As such, while women on boards is a welcome way to promote fairness, it is also good for a company’s performance. Investors should take note.