More women in senior positions translates into better financial performance
Companies that have more women in senior positions have better financial performance, according to a study released last month.
The study, sponsored by BMO and conducted by Catalyst, the New York-based non-profit organization dedicated to advancing women in business, tracked 353 Fortune 500 companies over four years, from 1996 to 2000.
It measured the companies on the return on equity and total return to shareholders. Among the 88 companies with the highest gender diversity in top management, called “top quartile companies,” return on equity was 17.7 per cent. That’s more than four points higher than the 13.1 per cent ROE of the bottom quartile — the 89 companies with the least women at the top.
Total return to shareholders for the top quartile companies was 127.7 per cent, 34.0 percentage points higher than the 95.3 per cent for the bottom quartile.
Companies in the top quartile have, on average, women in 20.3 per cent of senior positions, compared to 1.9 per cent representation of women in the bottom quartile. Female representation the top group ranged from 14.3 per cent to 38.3 per cent, whereas the range in the bottom quartile was from 0 to 5.1 per cent. Information on gender diversity was obtained from a Catalyst-compiled database that contains publicly available information.
Susan Black, vice-president of Catalyst’s Canadian office, said while the numbers do not establish causation, they show “that organizations who do well at a lot of things do well in talent management. And doing well in talent management means you create the conditions for talent to rise to the top.”
Catalyst undertook the study, said Black, because “we always find doubters when we go around talking to organizations, or we find people who may believe that gender diversity is a good thing but who need substantive data to support that viewpoint.”
The difference in financial performance does not apply across industries, however. In industrials, the difference between the top and the bottom quartiles was barely 0.4 per cent for return on equity and 7.9 per cent for total return to shareholders. In IT and telecommunications, the top and bottom quartiles were only separated by two percentage points in return on equity; in total return to shareholders, companies with the lowest level of gender diversity posted outscored companies in the top quartile.
In contrast, the difference between the top and bottom quartiles are most marked in consumer staples, consumer discretionary and financials industries, which Black noted, are industries with a strong consumer orientation.
“For us, we see this as a call to action for the companies that haven’t thought about how they’re managing their talent in terms of diversity. This should demonstrate to everyone that managing diversity well sets you apart as a better, more successful company.”
The study, sponsored by BMO and conducted by Catalyst, the New York-based non-profit organization dedicated to advancing women in business, tracked 353 Fortune 500 companies over four years, from 1996 to 2000.
It measured the companies on the return on equity and total return to shareholders. Among the 88 companies with the highest gender diversity in top management, called “top quartile companies,” return on equity was 17.7 per cent. That’s more than four points higher than the 13.1 per cent ROE of the bottom quartile — the 89 companies with the least women at the top.
Total return to shareholders for the top quartile companies was 127.7 per cent, 34.0 percentage points higher than the 95.3 per cent for the bottom quartile.
Companies in the top quartile have, on average, women in 20.3 per cent of senior positions, compared to 1.9 per cent representation of women in the bottom quartile. Female representation the top group ranged from 14.3 per cent to 38.3 per cent, whereas the range in the bottom quartile was from 0 to 5.1 per cent. Information on gender diversity was obtained from a Catalyst-compiled database that contains publicly available information.
Susan Black, vice-president of Catalyst’s Canadian office, said while the numbers do not establish causation, they show “that organizations who do well at a lot of things do well in talent management. And doing well in talent management means you create the conditions for talent to rise to the top.”
Catalyst undertook the study, said Black, because “we always find doubters when we go around talking to organizations, or we find people who may believe that gender diversity is a good thing but who need substantive data to support that viewpoint.”
The difference in financial performance does not apply across industries, however. In industrials, the difference between the top and the bottom quartiles was barely 0.4 per cent for return on equity and 7.9 per cent for total return to shareholders. In IT and telecommunications, the top and bottom quartiles were only separated by two percentage points in return on equity; in total return to shareholders, companies with the lowest level of gender diversity posted outscored companies in the top quartile.
In contrast, the difference between the top and bottom quartiles are most marked in consumer staples, consumer discretionary and financials industries, which Black noted, are industries with a strong consumer orientation.
“For us, we see this as a call to action for the companies that haven’t thought about how they’re managing their talent in terms of diversity. This should demonstrate to everyone that managing diversity well sets you apart as a better, more successful company.”
