Business performance increases by having more women on company boards, says study

Study finds business performance is linked to the number of women on the board.

The number of women on the board of a company can be correlated with business performance, according to a recent study. The report, Diversity Matters: Adding Colour to Boards in APAC, found that businesses with at least a tenth of board positions taken by women see, on average, a 3.6 per cent higher return on equity (ROE).

It seems that the importance of having female representation in the boardroom is becoming appreciated in more recent times, as highlighted by the report from Korn Ferry and the National University of Singapore (NUS) Business School’s Centre for Governance, Institutions and Organisations (CGIO).

 The study looked at 1000 boards across the economies of Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Singapore and South Korea, and found that the number of women in board leadership roles had increased.

Korn Ferry’s report showed the regional average for female representation in boardrooms rose to 9.4 per cent in 2013, up from just 8.0 per cent in the previous year. The greatest improvements were witnessed in New Zealand (up 4.5 per cent) and in China (up 4.2 per cent), while the number of all-male boards in most countries surveyed had declined.

When looking at the ROE, the research showed that boards with a higher female representation did better than those with less.

Boards that had ten per cent or more of seats filled by women saw, on average, a ROE of 15.4 per cent. Those boards that had less than ten per cent of female directors saw an average ROE of 11.8 per cent, which gives a significant difference of 3.6 percentage points.

The report then concludes that the number of women on a company’s board is positively correlated to a greater ROE.

"We found that more women on boards is linked to better company performance,” said Professor Marleen Dieleman, associate director of CGIO, NUS Business School.

“There is significant potential for companies to benefit from greater gender diversity in their boardrooms, particularly in Asian countries.”