Recent research focuses on business case for gender diversity on boards

The Australian Institute of Company Directors (AICD) has called for all boards to ensure that 30 per cent of their directors are female, urging ASX200 companies to meet this new target by the end of 2018.

How Many Women Do Boards Need?

Harvard Business Review, December 2006

The Australian Institute of Company Directors (AICD) has called for all boards to ensure that 30 per cent of their directors are female, urging ASX200 companies to meet this new target by the end of 2018. In support of the initiative, AICD Managing Director and Chief Executive Officer, John Brogden AM FAICD, has pointed to research demonstrating a positive link between the level of female representation on boards and improved corporate performance.

Recent empirical evidence includes the Credit Suisse report ‘The CS gender 3000: Women in senior management’ (September 2014). This study shows that “greater diversity in boards and management are empirically associated with higher returns on equity, higher price/book valuations and superior stock price performance”.

An earlier Credit Suisse study of almost 2,400 companies globally, titled ‘Gender Diversity and Corporate Performance’ (August 2012), also showed that greater gender diversity brings reduced volatility and more balance through the economic cycle. For large-cap stocks (market cap greater than USD 10 billion), companies with more than one woman on their board performed 26 per cent better than those with no female directors over a six-year period (between December 2005 and December 2011).

Other research suggests that the presence of three women on a board (or 30 per cent of a typical ten-member board) is the proportion of representation where “critical mass” is reached in a group setting. It is at this level where the voices of the minority group become heard rather than being simply represented and where, therefore, this increased capacity for diversity to deliver value begins to be optimised. The authors of a 2006 landmark study applying the notion of “critical mass” to gender diversity in corporate boardrooms summarise their findings in this short article.