To the Board, Ladies!

Feminine touch turns investments to gold

It’s like entering a boxing ring with one hand tied behind your back. Nah, too hostile.

It’s like… leaving half the ingredients out of a recipe. Or asking 10 people for opinions and only listening to five. Hmm. It’s like…

Oh, forget it. These stats don’t need any spicing up. Here’s the scoop: if your company has no women on its board of directors, it’s likely to perform worse than those that do. Yep, it’s that simple. More women on the board correlates to better financial outcomes.

The study was done by Catalyst (catalystwomen
.org), an organization that works to expand business opportunities for women. Looking at Fortune 500 companies, it compared the 25 per cent with the highest number of women directors to the 25 per cent with the lowest.

Here’s where the numbers speak for themselves. On average, the companies with the higher number of women had a 53 per cent higher return on equity. And a 42 per cent higher return on sales. And a 66 per cent higher return on invested capital. No matter what industry you look at—from health care to consumer staples to industrials—it’s a consistent story.

You’d think companies would take one look and start hunting for a little gender diversity. But here’s a sad number from a 2006 Stats Canada report: only nine per cent of directors at Canadian publicly traded companies are women. (And only 13 per cent of senior officer positions are held by women. Sheesh.)
Makes you wonder whether your investments are doing as well as they might, doesn’t it?

Dermot Foley wonders. But he doesn’t just muse about it like a columnist who can’t find a simile. The VP of strategic analysis at Inhance Investment Management, Dermot actually takes action. If a company Inhance holds shares in doesn’t have women on the board, Dermot will put forward a shareholder resolution to nudge them into action. (It works. What CEO wants a big discussion at a shareholders’ meeting about something that makes him look like a dinosaur and suggests less-than-average financial outcomes?) The most recent example was in January, when a mining company got a “nudge” letter from Dermot. The result? They’re now actively recruiting women for executive positions. If they’re successful, Inhance will withdraw the resolution. If not, it will go to all of the shareholders to be voted on.

Dermot points out that just over half of university graduates these days are women. If a company doesn’t have women right through the top of its ranks, it’s clearly not combing the entire field for talent—and that’s likely to impair performance in the long run.

“If you can attract the talent—and retain it—you’ll be the better company. You’ll create more value,” he says. “There’s this mythology out there that these heavy industries are ‘men’s industries.’ Well, a huge amount of the work that’s done in every industry has nothing to do with picks and shovels. Not that women can’t do that [thanks, Dermot!], but every company needs financial analysis, and legal and regulatory compliance, and many of the people graduating university in those professions are women.”

Dermot says more diversity on a board—gender, cultural, etc.—leads to better thinking.

“Canada is changing. The world is changing. To have a variety of perspectives on complex problems is extremely important. At the end of the day, the back-and-forth discussion between different perspectives is how you come to a much more optimal decision.”

Sure, it just makes sense. But you gotta love it when—plain and simple—the numbers tell the story.

Nina Winham is principal of New Climate Strategies (newclimate.ca), a consultancy that helps clients build value from progressive change. She tends to add a few extra ingredients to every recipe.