What does success look like for an investment company? Better returns. Realindex Investments is a data-driven firm constantly looking for ways to increase returns for its customers. It has recently released the findings of a global study of more than 30 countries and over 2500 large cap companies covering a time period spanning more than a decade.
The data reveals strong correlations between female executive participation and company performance/returns. While correlations between corporate female participation and better investor outcomes have been highlighted before, Realindex Investments’ new study, ‘Beyond lip service: tracking the impact of the gender diversity gap’, looks beyond the easy to find board-level diversity data and into executive team composition for a clearer link.
The study finds that companies with more diverse senior management teams have about 30% higher profit margins on average in the following 12 months than companies with lower gender diversity in any given year. It also finds that more diverse senior management teams can generate cumulative return on equity almost 30% higher than their lower-diversity counterparts over a 5 year period.
Further, the study finds investors in companies with more diversity in leadership teams are rewarded with higher returns. The study measures the senior management team annual return premium to be around 4%.
Over the period of the study, the proportion of women in senior management roles in Australia increased from 12% when disclosure requirements began in 2011 to around 26% by December 2021.
In other countries where disclosure mandates weren’t in play, senior management female participation remained low, while board participation climbed to match quota levels. In Italy and France, board representation reached 30% and 40% respectively but senior management diversity remained at 20% or below.
The study also discovered that globally there is a strong gender segregation in executive roles. While the percentage of women in senior HR and Company Secretary roles has continued to rise to 52% and 35% respectively at the end of December 2021 based on the dataset, only 17% of companies globally have a female CFO and just 5.5% have a female CEO.
Further gains in profitability and returns could be unlocked if companies find ways to bring more female participation to leadership roles outside of HR and company secretary functions. In Australia, according to the 2021 Chief Executive Women Senior Leadership Census, there were 18 female CEOs in the ASX 300, and out of the 23 new CEO appointments in 2021, only one was a woman.
Dr Joanna Nash, a co-author of the study, says the data clearly shows more gender diversity in leadership teams deliver better performance outcomes.
“There has been a long-held notion that improved diversity leads to better teams and decision-making. Realindex has interrogated a comprehensive global data set to test this notion, and it’s clear that female participation in leadership teams is good for companies, shareholders and investors.”
You can read the full report HERE
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