Daily Management Review

Credit Suisse Report finds Company Returns more for Companies with Female CEOs & Board Members


09/26/2016




The latest update to a key Credit Suisse report confirmed that with stock-price returns sometimes more than double that of less diverse companies, companies with more female senior managers perform better.
 
"We find clear evidence that companies with a higher participation of women in decision-making roles continue to generate higher returns on equity, while running more conservative balance sheets," Credit Suisse's chairman Urs Rohner, and Iris Bohnet, a public policy professor at Harvard University and Credit Suisse board member, said in the report.
 
"In fact, where women account for the majority in the top management, the businesses show superior sales growth, high cash flow returns on investments and lower leverage," the report found.
 This report was an update on a study the Swiss bank conducted in 2014 and which surveyed almost 3,400 companies across all industries and regions.
 
With those companies' return on equity averaging about 19 percent higher and dividend payouts about 9 percent higher than companies with a male CEO, the authors found that the market put a 19 percent premium on the price-to-book multiple of companies with a female CEO.
 
And the report said that companies noted higher stock price returns when it had more senior management roles filled by women.
 
The study found that while those companies with women in more than 33 percent of senior management roles had a 25.6 percent average annualized return, shares of those where women make up 25 percent of senior managers had annualized average stock returns of 22.8 percent over five years. An average annualized return of 28.7 percent was recorded by companies where more than half of senior managers were women, the report found.
 
The report further said that this was comparable to a 11.7 percent return on the MSCI All Country World Index over the same period.
 
Compared with companies that had fewer than 15 percent female participation or all-male teams, companies with women in 25 percent of senior management roles outperformed by 2.8 percent on a compound annual growth rate (CAGR) basis, the study found, based on that index.
 
The report found that this number rose to 4.7 percent for firms with 33 percent female representation and 10.3 percent for those with more than 50 percent female representation.
 
Compared with companies where the board was entirely male, between 2005 and 2015, the excess compound returns of companies with more than one woman on the board of directors were around 3.5 percent a year.
 
"The greater the number of women, the better the results. There is still a clear opportunity for investors who understand the value creation of diversity," the report said.
 
Counter intuitively, adding women to the boardroom sometimes resulted in fewer women being chosen for senior management roles, the report noted, that progress in adding women to corporate boardrooms and senior management had been sluggish.
 
"The central hypothesis behind the analysis in this report is that management manage companies and that boards supervise them. Seeing greater diversity in the former rather than purely the latter is the genuine sign of corporate change and a delivery of enhanced corporate performance," the report said.
 
The report suggested that moving to the board was a "retirement" position for men as it noted that the average age of male directors was over 60 in Europe and 64 in the U.S. But more aligned with the age of full-time executives is the average age of female directors which was around 55 in Europe and 60 in the U.S., the report found.
 
(Source:www.cnbc.com) 






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