It’s dumb not to fill your company’s board with women

Hasta la vista, fellas.
Hasta la vista, fellas.
Image: Getty Images
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Worldwide, only about one out of every ten corporate board members is a woman (PDF).

That’s a sharp imbalance, and some countries and institutions have been working to correct it. In 2003, Norway introduced a mandate that at least 40% of every public company’s board be female, and last year, the European Union passed a similar quota to go into effect by 2020 (though the target, also 40%, won’t be a hard requirement). Morgan Stanley, on the other hand, is providing a way for investors to vote for corporate gender equality with their money: Starting in April, it will offer a “parity portfolio” that selectively invests in companies with women on their boards.

But companies that actually need external pressure to appoint female directors are being daft. A growing body of research shows that having women on the board is a huge boon. A new study suggests that female board members are more inclined than their male counterparts to make decisions based on fairness when there are competing interests at play and less likely to stick to tradition for tradition’s sake (which is a good quality, if you value a responsive and forward-thinking board).

Here is more evidence that having more women on the board makes companies better:​

1. Between 2005 and 2011, the share price of companies with at least one woman on the board outperformed those with none by 26%.

When comparing companies with similar market caps. (From Credit Suisse.)

2. Fortune 500 companies with the most women on their boards have produced a 53% stronger return on equity than those with the fewest.

Companies with a high proportion of women on the board perform better

Of course, it’s not clear from this data that the women in question are ushering in these returns. According to Credit Suisse, larger, more profitable businesses do tend to appoint more women to the board. Still, at the very least, more female board members signifies a healthier company.

3. Having at least one female on the board reduces a company’s risk of bankruptcy by 20%.

According to research from the Leeds University Business School (paywall).

4. Boards with three or more women are 42% more likely to explicitly monitor whether the company is following the board’s strategy than boards with only men.

This result comes from the Conference Board of Canada, which notes:

Boards with more women are also more likely to use committees, particularly an executive committee and a strategic planning committee. The sense is that these boards are taking a more active role in setting the strategic direction and weighing long-term priorities. Far from focusing on traditionally ‘soft’ areas, boards with more women surpass all-male boards in their attention to audit and risk oversight and control.