October 1, 2007 / 5:03 AM / 12 years ago

Women directors help boost the bottom line

NEW YORK (Reuters) - Having women well represented in the corporate boardroom can help improve financial performance, according to a new study by a group that promotes women in executive roles.

A woman is silhouetted at Canary Wharf business district in London May 1, 2007. Having women well represented in the corporate boardroom can help improve financial performance, according to a new study by a group that promotes women in executive roles. REUTERS/Luke MacGregor

Catalyst Inc, a nonprofit organization focused on women in the workplace, is set to release a report later on Monday showing that big companies with the greatest number of female board members on average have significantly better financial performance than those with fewer women.

The report looked at financial results, such as return on equity, at the 500 largest U.S. corporations. Those with at least three women directors had notably stronger financial performance, on average, the study found.

The results suggest that “diversity, well managed, produces better results” for companies, said Catalyst President Ilene Lang. “Bringing women on their boards to represent the stakeholders really gives them a better company and better performance.”

The correlation was found throughout an array of industries, she said.

The study looked at three financial measures — return on equity, return on sales and return on invested capital — at companies in the Fortune 500 over the 2001-to-2004 period.

Those years were chosen because they were part of a financial recovery period following significant stock market turmoil.

In return on equity, on average, companies with the highest percentages of women board members outperformed those with the least by 53 percent, the study found.

In return on sales, the companies with more women board directors outperformed by 42 percent on average and in return on invested capital, by 66 percent, Catalyst said.

The group said it chose these three benchmarks, rather than things such as earnings or stock price movement, to try to best track how a company performed financially.

Because of movement in and out of the Fortune 500, there were 520 companies in the analysis. Several academic experts worked with Catalyst researchers to compile the report.

Women are still a small minority in the boardroom, holding 14.6 percent of Fortune 500 board seats in 2006, down slightly from 14.7 percent in 2005, but up from 9.6 percent in 2005, according to prior research from Catalyst. If the pace continues, it would take about 73 years for women to be equally represented on boards, the group projects.

Myrtle Potter, a director at Amazon.com Inc and FoxHollow Technologies Inc who was not involved in the preparation of the new study but reviewed the results, said the data showed women board members can have a major impact.

“I have believed all along that having different voices around the table makes a difference,” she said. “It just goes to show that there is still a need for greater diversity on boards at publicly traded companies.”

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