Yes, gender diversity makes you more profitable

An Australian study suggests a causative relationship between increasing female representation in senior roles and better long-term returns.

by Adam Gale
Last Updated: 16 Jul 2020

There’s long been evidence that businesses with more diverse senior leadership teams are on average more profitable, but a causative relationship has proven elusive, because there are too many extraneous factors. It could be, for example, that profitable companies hire more women, not the other way round.

A new report into listed Australian companies goes some way towards strengthening the business case for diversity (the moral case remains unaffected). Gender Equity Insights 2020, published by Bankwest Curtin Economics Centre at the Curtin Business School, examined what happens to business performance after a change in gender diversity among senior leadership teams.

Looking at ASX-listed firms between 2014-2019, the researchers found companies that increased their share of female key decision makers by 10 per cent or more had a 5.8 per cent higher than average chance of outperforming their sector across a portfolio of financial metrics, including EBIT.

This was after multivariate regression analysis that controlled for prior financial health, sector trends and the timing of the change in personnel.

“Workplace gender equality is not just a matter of fairness but a commercial imperative,” conclude the authors. “More women as key decision makers will deliver higher dividends for a company.”

Image credit: Peter Koralev/Getty Images

This article first appeared in the summer digital edition of Management Today

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