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Publication Title | Women in business: the value of diversity

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Women in business: the value of diversity

Renewable energy and board diversity: two very different but topical issues with shared challenges. People generally accept that the world needs to move away from fossil fuels; that we can’t go on as we are; that collectively it’s our duty to make progress and clean up our act.

However, unknowns over performance remain: can we rely on renewables when the sun doesn’t shine or the wind doesn’t blow? Upfront costs are higher, so how long will it take for the savings

to feed through?

In the same way, we know there

is a moral imperative to get more women on the boards of companies

– that the status quo is the product

of a bygone era. But what about nancial performance? Do companies with diverse boards really perform better than those run purely by

men, which currently dominate

the corporate landscape?

The answer is yes: they perform better. Materially better.

Research from the Kellogg School of Management and the Scienti c American has shown how heterogeneity can boost decision- making. These bodies of work were a catalyst for us to explore the hard commercial impact of diverse boards – to understand the value of diversity in terms of nancial performance.

Until recently it has been dif cult to make a decent assessment. There were too few signi cantly sized companies with women on the board and on which nancial performance information is readily available.

But we have now reached a position where all but 16 of the S&P 500 have

a woman on their board; 330 of the FTSE 350 do; and in the Indian CNX 200, 176 companies have a female board member. This is progress but for the most part, these women are employed as non-executive directors. Just 127 of the 1,050 companies we looked at in India, the UK and US employ women as executives.

Companies with diverse executive teams outperform competitors run by men only

So it is here that we have focused our research, where women are involved in the day-to-day operations of a business. Based on return on assets, companies with diverse executive teams outperform by a signi cant margin

in the three markets we explored.

Our analysis suggests that the pro t foregone - or opportunity cost - by

the companies with male-only boards is a staggering $655 billion across the three economies. In the UK and US the impact of moving to mixed boards on the S&P 500 and FTSE 350 could boost GDP by around 3%. Impressive as they are, however, these numbers are based just on large listed companies. Further, unquanti able, potential lies

beyond in non-listed companies and mid-sized companies.

Our research into the proportion

of senior business roles held by women has revealed precious little movement over the past decade. Perhaps businesses have simply not been aware of the value diversity brings. So it makes sense to invest in your high-performing junior women now to make sure they are

ready and willing to take the step up into senior management.

Just as the world will grow faster and more sustainably powered by renewables, your business growth potential will increase with greater diversity in decision-making. The numbers laid out in this report speak volumes. Now is the time to take positive action. It’s time to plug into a new source of energy.

Francesca Lagerberg

Global leader - tax services & Europe Grant Thornton

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