Companies with higher female participation at board level exhibit higher returns and payout ratios, according to a report by Credit Suisse Research Institute.
The CS Gender 3000: Women in Senior Managementreport tracked the gender mix among key senior management roles across company, industry and country lines drawn from more than3000 companies and 28,000 senior managers across 40 countries and all major sectors.
The findings revealed that female participation in top management roles such as chief executive (CEO) and directors reporting to the CEO stood at 12.9% at the end of 2013. Just 4% of CEOs in the report are female. Since the start of 2012, there has been a 5% out-performance on a sector neutral basis by those companies with at least one woman on the board. A longer trend analysis showed a compound annual excess return since 2005 of 3.7%.
The report evaluated the average financial metrics and found:
– Higher return on equity (ROE): Since 2005, the average sector-adjusted ROE of companies with at least one female member since 2005 has been 14.1% compared to 11.2% for those with zero representation. When looking at top management and adjusting for any industry bias, companies with more than 15% of women in top management had a 2013 ROE of 14.7% compared to 9.7% for those where women represent less than 10% of the top management.
– Higher payout ratio: Companies that have at least on woman on the Board of Directors have seen an average payout ratio of 38% since 2005 vs 32% at companies with no female directors.
– There was less convincing evidence that women run more conservative business models: Companies with less than 10% of women in top management showed at the end of 2013 a net debt to equity ratio of 35% versus 57% for companies with more than 15% of women in top management. There was no difference though when the report looked at board representation: average data since 2005 showed that net debt/equity where there is female board representation has been 47.7% compared to 47.5% for male-only boards.
On the surface, the news appears good for gender diversity, according to the CS Gender 3000 survey. Board diversity has increased in almost every country and every sector, progressing from 9.6% to nearly 12.7% at the end of 2013. However, more detailed analysis of the data revealed disappointing figures for women in top management positions. The research looked at companies comprising the FTSE100 and Standard & Poor (S&P) 500 indices and found that male CEOs outweigh females by 20 to one and UK male executive directors outnumbered female executive directors by 10 to one. Although the overall representation of women in senior management positions is comparable with that of the board data, there was a notable contrast in terms of the nature of the responsibilities held by the women.
The report revealed that worryingly, women in management were concentrated in roles which were not associated with influence and power such as shared services and staff functions. In all the regions, women had significantly greater representation in shared services rather than CEO or operational roles. These positions carry less influence and typically have less profit and loss responsibility. The report cited Bloomberg data that 94% of S&P 500 CEOs held top operations positions immediately before ascending to the top job and warned that the relative scarcity of women overseeing product lines or entire business units risked slowing their advance to the very top.
By Karen Higginbottom