LONDON–(BUSINESS WIRE)–Companies with diverse executive boards outperform peers run by all-male
boards according to new research from Grant Thornton. The study, which
covers listed companies in India, UK and US, estimates the opportunity
cost for companies with male-only executive boards (in terms of lower
returns on assets) at a staggering US$655 billion in 2014.
The numbers are revealed in Women in business: the value of diversity,
a new report from Grant Thornton scrutinising the financial performance
of companies listed on the S&P 500, CNX 200 and FTSE 350. Although
acknowledging the progress made by women at a non-executive level, the
report focused on whether diverse executive teams – the people involved
in day-to-day business operations – outperform male-only peers. Analysis
of the return on assets ratio (also known as return on investment)
showed that, on average, companies with at least one female executive
board member outperformed those with male-only boards in each of the
three markets analysed.
Francesca Lagerberg, global leader for tax services at Grant Thornton,
“I liken the debate around board diversity to that of renewable energy.
We know it’s the right thing to do – both in terms of fairness and for
sustainable future growth – but collectively society is dragging its
heels. The response to both issues seems to be ‘Yes, we need to take
action, but it will be expensive to implement in the short-term,’ so we
kick the can down the road.
“But the message from our research is clear: there is a large
opportunity cost for companies associated with male-only executive
boards. Those businesses stuck in the past are not fully unlocking their
growth potential. Like a world still addicted to fossil fuels, these
companies are suffering now. A lack of action now will make it all the
more difficult to respond in the future when both problems are likely to
be more acute.”
In the US, S&P 500 companies with diverse boards outperformed rivals by
1.91%. In the UK FTSE 350 the gap was 0.53% and for the Indian CNX 200,
0.85%. This translates into an opportunity cost of US$567bn, US$74bn and
US$14bn in each of the three markets respectively – or around 3% of GDP
in the UK and US.
Francesca Lagerberg added: “The research clearly shows what we have been
talking about for a while: that diversity leads to better
decision-making. We only looked at listed companies in three markets and
the figures are compelling. Now imagine extrapolating the results for
all companies globally.
“However, just one in ten of the companies we analysed have women board
executives. I believe that organisations have not seen a clear business
case for change but the work we have done articulates the advantages of
diverse boards in a language that businesses will understand.
“If companies don’t instigate change then their investors will quickly
become concerned they are missing out on potentially huge performance
benefits. These investors need to put pressure on their portfolio
companies and work with non-executive teams to progress conversations to
ensure they’re taking a diligent approach to board composition.
“And finally, these findings are a prompt to governments. Business run
by diverse boards are generating greater returns on the assets they
employ. In an era when productivity puzzles persist and economies trade
within globalised markets, facilitating female participation at a
decision making level within companies might just give them a
The report is available at www.grantthornton.global
John Vita, 312-602-8955