More female executives probably do lead to better company performance

Another report says more women at the top are good for business. But what about other forms of diversity?

by Rachel Savage
Last Updated: 22 Dec 2015

It can seem like every week that research is released trumpeting the positive effects of women on business performance. And today it was Grant Thornton’s turn to have a crack at the diversity data.

The accountancy compared the return on assets (otherwise known as return on investment/ROI) where there’s at least one woman on the executive board to those with none, for the largest publicly listed companies in the US, India and the UK. And - perhaps unsurprisingly for anyone who follows gender issues - it found those with female executives performed better.

The 35 companies in the S&P 500 with at least one female exec (yes, it’s that depressingly few) had a nearly 2% higher return on assets – 8.68% compared to 6.77%. For the 45 businesses in India’s CNX 200 the figure was 0.85%, while it was 0.53% in the FTSE 350.

Source: Grant Thornton

The report didn’t actually say what period of time this was over, although a spokesperson said it was based on companies’ most recent accounts as of April 2015. That would indicate the figures are a mere snapshot.

There were also other drawbacks. Firstly, there was no distinction between different numbers of female execs. Secondly, there was no adjustment for different industries. That leaves open the possibility of women being concentrated in higher performing ones – after all, correlation does not equal causation.

However, it does fit into the broader cannon. There is research that supports both sides of the debate about whether more women do make for good business. But a review of no fewer than 140 studies by American professors Corinne Post and Kris Byron found female directors (non execs as well as execs) do positively correlate with better company performance.

There is debate about whether women do bring different skills to leadership positions or are as diverse as humanity itself. But Post pointed out in an interview that, according to their research, female board members tended to have different backgrounds to their male counterparts. And that helps mitigate the negative impacts of groupthink at the top of a company.

On the flipside of that, it is now generally accepted that diversity leads to better decision-making. Yet the issue is largely dominated by gender, often obscuring the different discussions needed around race, sexuality, socio-economic background and all the other dimensions of human experience.

As Grant Thornton’s UK boss Sacha Romanovitch put it, ‘This goes beyond solely the issue of gender. If we consider diversity in the round, including areas of socio-demographic and racial diversity, amongst others, the opportunity to develop a wider perspective on the world is huge.’

‘It’s about creating a business environment that is attractive to people from all walks of life,’ she continued, ‘removing real – and perceived - barriers to progression and genuinely valuing diverse perspectives.’

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