Aderant Think Tank: Why Do Firms With Women In Charge Make More Money?

Aderant Think Tank

Aderant Think Tank: Why Do Firms With Women In Charge Make More Money?

Last Saturday was International Women’s Day 2014 (www.internationalwomensday.com). I think we can all agree that full gender equality has not yet arrived in law or business, and especially not in the executive suite. As a woman executive I wonder what will generate a fundamental shift?  What if the issue of getting more women into leadership positions was actually an economic issue rather than simply about fairness? A recent report suggests that is indeed the case. In their 2013 report titled Why Diversity Matters the non-profit Catalyst group noted these fascinating statistics:

Since 2004, a series of Catalyst studies has shown that companies that achieve diversity in their management and on their corporate boards attain better financial results, on average, than other companies. Catalyst’s 2011 study found that companies with the most women board directors outperformed those with the least on return on sales (ROS) by 16 percent and return on invested capital (ROIC) by 26 percent. Companies with sustained high representation of women—three or more women board directors in at least four of five years—significantly outperformed those with no women board directors. In 2007, Catalyst found that companies with more women board directors outperformed those with the least on three financial measures: return on equity (53 percent higher), return on sales (42 percent higher), and return on invested capital (66 percent higher).

The Catalyst report also cited a McKinsey analysis which found that “the 89 European-listed companies with the highest proportions of women in senior leadership positions and at least two women on their boards outperformed industry averages for the Stoxx Europe 600, with 10 percent higher return on equity, 48 percent higher EBIT (operating result), and 1.7 times the stock price growth.”

If all that weren’t enough to convince you, just last month CNBC reported that female hedge fund managers significantly outperformed their male rivals. According to the story “from Jan. 1, 2013, through the end of November, the small number of hedge funds around the world run by women returned 9.8 percent while the HFRX Global Hedge Fund index was up only 6.13 percent… The numbers are even more eye-popping for the six years from January 2007 through June 2013. Hedge funds run by women returned 6 percent compared with a 1.1 percent loss at the HFRX Global Fund Index.”

These economic stats truly are mind-blowing and the “why” question is a tricky one. I know from personal experience that bottom line financial performance does relate to collaboration and communication with staff and clients.  I firmly believe that women often excel at cooperation and communication and diversity of all kinds in a workforce at all levels strengthens an organization.

How well is your firm doing at building a diverse workforce? I look forward to reading your comments.


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