Women Directors in Malta (WDM) has consistently argued that women of all backgrounds should have equal opportunity and equal access to progress to board level positions, on a level playing field.
Board appointments should be made on the basis of commercial needs, skills and ability.
WDM also believes that there are clear business arguments for appointing women at board level.
A number of studies (‘Women in the boardroom and their impact on governance and performance’, Journal of Financial Economics, 2009) have suggested that “companies with a higher share of women at top levels deliver strong organisational and financial performance.”
It is argued that a “more diverse board of directors can contribute to better performance because decisions are based on evaluating more alternatives compared to homogenous boards”.
It is also shown that where governance is weak, “female directors can exercise strong oversight and have a positive, value-relevant impact” on the company. “A gender-balanced board is more likely to pay attention to managing and controlling risk.”
Studies have shown that the quality of corporate governance and ethical behaviour is high in companies with a high share of women on boards.
Ernst & Young, Deutsche Bank Research (2010), in ‘Groundbreakers, Using the Strength of Women to rebuild the World Economy’, also demonstrates that companies with a higher share of women at top levels can deliver strong organisational and financial performance.
The quality of corporate governance and ethical behaviour is high in companies with a high share of women on boards
Furthermore, the McKinsey ‘Women Matter’ (2009) study also reported that “companies that scored in the top quartile of organisational performance – those companies with more women in top management – tended to have an operating margin at least twice as high as those in the bottom quartile”.
In their 2010 study, ‘Women at the top of corporations: Making it happen’, McKinsey reported a “41 per cent higher return on equity for companies with the highest share of women on their boards, compared to companies with no women on their boards”.
Catalyst’s two studies also demonstrate a strong correlation between corporate financial performance and gender diversity at board level. In its second study, ‘The Bottom Line: Corporate Performance and Women’s Representation on Boards’ (2007), it looked at three critical financial measures: return on equity, return on sales, and return on invested capital, and compared the performance of companies with the highest representation of women on their boards to those with the lowest representation.
Return on equity: on average, companies with the highest percentages of women board directors outperformed those with the least by 53 per cent.
Return on sales: on average, companies with the highest percentages of women board directors outperformed those with the least by 42 per cent.
Return on invested capital: on average, companies with the highest percentages of women board directors outperformed those with the least by 66 per cent. The correlation between gender diversity on boards and corporate performance was found across most industries.
Finally, Credit Suisse Research Institute in a 2012 study (‘Gender diversity and Corporate Performance’) compiled a database on the number of women – since 2005 – sitting on the boards of the 2,360 companies constituting the MSCI AC World index.
The outcome shows that “over a six-year period, companies with at least one female board member outperformed those with no women on the board in terms of share price performance”.
Food for thought! The next event to be organised by WDM, a business breakfast, will be held on Wednesday. All those that are interested are to contact info@womendirectors.org.mt.
Michelle Gialanze and Louis Naudi are president and committee member respectively of Women Directors, Malta.