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A Woman’s Place Is in the Board Room
By Holly Testa, Director, Shareowner Engagement

A growing body of evidence strongly suggests that companies with women serving on their boards of directors and in senior management positions outperform those that do not.  Increased representation of women on boards appears to strengthen corporate social responsibility records, improve integration into the communities where the companies operate, and put a stronger focus on long-term sustainability issues.

Does Gender Influence Corporate Responsibility?

A recent study, Gender and Corporate Social Responsibility, from Catalyst and Harvard Business School found that companies with more women serving on their boards and more women among the ranks of corporate officers contribute significantly more than companies with fewer or no women in senior roles.  Average donations of companies with three or more women directors were 28 times higher than those of companies with no women directors.  Companies with 25% or more women corporate officers as of 2007 made annual contributions that were 13 times higher than by those with no women corporate officers.

A cynic might say that higher charitable giving has a negative impact on the bottom line; after all, the money given away represents a cost to the company.  But could it be that women are better able to recognize the value of targeted philanthropy?  Corporate philanthropy is a cornerstone of corporate social responsibility—women may help companies tap into the benefits of integrating responsible philanthropy into their business models.

By the Numbers

A report by Catalyst, The Bottom Line, Corporate Performance and Women's Representation on Boards indicates that Fortune 500 companies with the highest representation of women board members attained significantly higher financial performance, on average, than those with the lowest.

The study also revealed stronger-than-average performance at companies with at least three women directors on three key indicators.  Companies with the highest percentage of women on boards exceeded average return on equity by at least 53%, return on sales by at least 42%, and return on invested capital by at least 66%.

A Missed Opportunity

Women are woefully underrepresented in corporate boardrooms worldwide.  The 2011 Corporate Boards Report from Governance Metrics Inc. (GMI) found that of the 4,200 companies covered worldwide by GMI, the aggregate percentage of board seats held by women was only 9.8%.  In the United States, the aggregate percentage of female directors is just over 12%.  Even the most progressive of companies seldom have three or more women board members.  But as evidence continues to mount in support of the observation that gender diversity in boardrooms and executive suites can produce better outcomes for companies, shareowners, and communities, companies seeking to outperform their competitors need to re-evaluate how they choose board members and why.

For a full report on the benefits of increasing the number of women on corporate boards and the ongoing efforts by shareowners to improve gender diversity, read The First Affirmative publication, Deeper Thinking: A Woman's Place in the Boardroom.

Posted: February 17, 2012