Fortune 500 companies with the highest representation of women board directors attained significantly higher financial performance, on average, than those with the lowest representation of women board directors, according to Catalyst’s most recent report, The Bottom Line: Corporate Performance and Women’s Representation on Boards. In addition, the report points out, on average, notably stronger-than-average performance at companies with three or more women board directors.
The study, which is the second of Catalyst’s Bottom Line reports, looked at three critical financial measures: return on equity, return on sales, and return on invested capital, and compared the performance of companies with the highest representation of women on their boards to those with the lowest representation.
“Clearly, financial measures excel where women serve on corporate boards,” said Ilene H. Lang, President of Catalyst. “This Catalyst study again demonstrates the very strong correlation between corporate financial performance and gender diversity. We know that diversity, well managed, produces better results. And smart companies appreciate that diversifying their boards with women can lead to more independence, innovation, and good governance and maximize their company’s performance.”
The report found higher financial performance for companies with higher representation of women board directors in three important measures:
Return on Equity: On average, companies with the highest percentages of women board directors outperformed those with the least by 53 percent.
Return on Sales: On average, companies with the highest percentages of women board directors outperformed those with the least by 42 percent.
Return on Invested Capital: On average, companies with the highest percentages of women board directors outperformed those with the least by 66 percent.
The correlation between gender diversity on boards and corporate performance can also be found across most industries—from consumer discretionary to information technology.
Reprinted from Catalyst.org October 2007
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