Credit Suisse (CS) have revisited their statistical analysis previously conducted to objectively assess whether there is a business and, importantly, investment case that supports greater gender diversity.
CS looked beyond the issue of how differing female representation in board structures may impact financial metrics to consider senior management representation. To do this, they created a proprietary database from Credit Suisse’s global company research coverage, amounting to more than 3,000 companies across 40 countries and all major sectors—“The Credit Suisse Gender 3000 (CSG 3000).”
It tracks, by company, industry and region, the gender mix across the key senior management roles of CEO, CFO, Operations and Shared Services. Their initial focus on board structure was understandable not least because it was the prime focus for regulators and policy makers. However, the reality is boards supervise but do not necessarily manage companies. The key is whether a diverse board structure is mirrored in a diverse management team.
Companies displaying greater board gender diversity display excess stock market returns adjusted for sector bias. Companies with more than one woman on the board have returned a compound 3.7% a year over those that have none since 2005. The excess return has moderated since their initial report. Over the last two and a half years, the excess return is a compound 2.0% a year.
CS find also that companies with higher female representation at the board level or in top management exhibit higher returns on equity, higher valuations and also higher payout ratios.
On a widely used risk metric—the debt to equity ratio— we find almost no difference between companies with no women on the board and those with at least one woman on the board in terms of their appetite for debt; in fact, we note that companies with more than 15% of women in the top management show significantly higher debt to equity ratios, compared to those with less than 10%. This may confound some who have suggested women operate an inherently risk averse approach. We find little evidence to support this where debt is concerned.