Women-savvy companies: a better investment bet

Typically, investors focus on bottom-line results, sustainability and social responsibility – but that is no longer enough. Smart investors should bet on women-savvy companies to get what Deloitte, the consultancy, calls the “gender dividend”.

The business case is strong. A 2007 study of Fortune 500 corporations by Catalyst, an organisation focused on women in the workplace, found the companies with the highest proportion of women on their boards appreciably outperformed the lowest in terms of sales, equity and return on capital. A 2009 study by Calpers, the California state pension plan, that also recently established a gender-diverse database of independent directors with Calstrs, the California State Teachers’ Retirement System, determined diverse boards outperform homogeneous ones. Other studies show that a critical mass of women at the helm enhances 21st-century talent management, improves governance and ethics, shifts corporate decision-making to more risk-awareness and a longer horizon, and effectively reaches the growing women’s market.

So where are we? The news is sobering because the talent pipeline has sprung a major leak. In 10 years the proportion of women board members on Fortune 500 companies has barely crept up from 12 to 15 per cent and 60 have no women. This year the Financial Women’s Association saw a decline of women in C-suite jobs in New York to 9.8 per cent with companies with no female highly compensated executives increasing 12 per cent. Two out of five of the largest Massachusetts companies have no women on their boards; the largest California companies have 90 per cent male directors.

While the US is in poor shape to reach the tipping point of 30 per cent women in leadership to gain the gender dividend, globally change is in the air. The World Economic Forum focuses on closing the gap between women and men as an economic imperative. The UN Women’s Empowerment Principles (WEP) have been endorsed by 170 chief executives. In the UK, chief executives of the FTSE 250 do personal cross-industry mentoring for promising women board candidates and the government’s recent Davies Report called for voluntary quotas. Norway, Spain, France, the Netherlands, Italy, Belgium, Iceland, Israel, Quebec and the EU are all moving on legislated quotas.

Money talks so shareholders should demand action. Gender Equality as an Investment Concept, a paper by Joe Keefe, chief executive of Pax World, the US mutual fund house, suggests first steps: say “no” to all-male corporate boards on annual proxies and say why; have investment advisors investigate gender diversity of companies; hold management accountable; and urge companies you hold to sign the WEP. The US Securities and Exchange Commission should follow the “if not, why not” ASX model to require transparency on gender equality internal goals, benchmarks and progress. Investing in women-savvy companies will bring better results.

Linda Tarr-Whelan, former ambassador to the United Nations Commission on the Status of Women, is a Demos distinguished senior fellow and the author of Women Lead the Way: Your Guide to Stepping Up to Leadership and Changing the World (Berrett-Koehler, 2009, 2011). She is chairwoman of the Pax World Women’s Advisory Council

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About our bloggers

Liz Bolshaw

Liz Bolshaw is a business journalist and editor. She has been a successful book publisher, online editor, magazine editor and publisher.

She was launch editor of the Europe-wide online community Entrepreneur Country, has published magazines for PwC, 3i, dunhill and Bafta, and launched The Sharp Edge, a magazine for and about entrepreneurs, with Duncan Bannatyne. She is a regular contributor to Thomson Reuters’ Venture Capital Journal.

Her last project for the Financial Times was as editor of the paper’s Business Education magazine.

Rebecca Knight

Rebecca Knight is a freelance journalist based in Boston. She writes regularly for the FT on business education, entrepreneurship, and management.

Andrew Hill

Andrew Hill is an associate editor and the management editor of the FT. He was City editor of the FT and editor of the daily Lombard column on British business and finance from September 2006 to December 2010.

He was the FT’s financial editor from June 2005 to September 2006, with overall responsibility for coverage of companies and markets. Before becoming financial editor, he was the FT’s comment & analysis editor, in charge of the paper’s opinion and features pages.

From 1999 to 2003, he was the FT’s New York bureau chief. He joined the FT in 1988 and has also worked as foreign news editor, UK companies reporter and correspondent in Brussels and Milan.

Pino Bethencourt

Pino Bethencourt is a professor and leadership expert at IE Business School in Madrid. She is also an author and executive coach.

Lynda Gratton

Lynda Gratton is professor of management practice at London Business School.

Linda Tarr-Whelan

Linda Tarr-Whelan, former ambassador to the UN commission on the status of women, is a Demos distinguished senior fellow.