Understanding and unlocking the value in gender equity
The investment case for advancing gender equality in corporations is strong and clear, according to Calvert Research and Management, a responsible investing affiliate of New York Stock Exchange listed Eaton Vance.
Women make up 50 percent of the global working-age population and have educational attainment that is close to comparable with men’s globally.
However, figures show that women have significantly lower labour participation rates than men globally and the gap widens when management roles are included.
Calvert’s report Evaluating the Glass Ceiling: Understanding and unlocking the value in gender equity outlines the business case for corporations to support more diverse and inclusive workforces from the boardroom to the front line and how investors can be called upon to push for changes that will have a material impact on long-term shareholder value.
A media release from Eaton Vance says that in order to do this, Calvert evaluated the research on gender diversity’s material benefits both to companies’ bottom lines and to the broader economy, highlight relevant trends in government and investor actions, and review progress on the path to gender equity, providing global and industry context as needed.
The research supports three main findings: 1. Companies that prioritise diverse and inclusive workplaces, demonstrated by greater female presence in leadership positions, have stronger financial performance over time. 2. Women’s labour force participation is likely to increase when strong and effective family-friendly policies are in place. 3. Investors have a role to play in ensuring boards and management support policies that promote gender equity. Successful companies must be able to understand the various trends that will determine their competitive future and plan accordingly. The media release says that recent research demonstrates the value of gender diversity at all levels of the corporate structure, particularly at the higher echelons of the boardroom and C-suite. Studies link a greater female presence with many metrics of increased corporate financial success.
“The most robust body of research links board gender diversity to positive business performance. A study by MSCI found that companies with at least three women on their boards had median increases of 10 percent in return-on-equity (ROE) and 37 percent on earnings-per-share (EPS) from 2011-16.
“In contrast, those with no women had median decreases of one percent and eight percent respectively, over the same period.
“Furthermore, adding any number of female directors correlated with higher increases in EPS compared to losing women from the board during the same period. Credit Suisse linked board diversity to higher equity, lower leverage, and higher price/book ratios in 2012, 2014, and 2016.
“Similar findings apply to executive leadership. A 2016 study by Peterson Institute for International Economics analysed almost 22,000 firms globally and found a repeated and significant link between higher level of females in C-suite management and firm profitability.
“In a 2018 analysis, McKinsey found that companies in the top quartile for gender diversity on executive teams were 21 percent more likely to outperform on profitability and 27 percent more likely to have superior value creation, affirming similar findings from a 2015 study.”
The report also notes that in some countries, government intervention has pushed companies to focus on changing board-election processes to better reflect the available pool of diverse director talent. Norway started the push in 2003 with its requirement that 40 percent of company boards be female and momentum has increased worldwide since then.
The report says investors are also increasingly pressuring companies to diversify. Some 53 percent of US investors think companies should take a public stand on workplace diversity and 57 percent strongly agree that board and executive diversity affect their trust when considering investing in or recommending a company.