Exploring facets of a gradual yet definite phenomenon called ‘woman business leaders on top seats”.
According to a recent report by Index Provider MSCI, companies with strong female leadership deliver a 36% higher return on equity. This study included 1,643 companies covered by the MSCI World Index. Strong Female leadership constitutes those institutions that have three or more women on the board or a female CEO and at least one other female board member.
Other interesting observations reflected during the course of research are as follows:
- Over an extended period of time i.e. from the end of 2009 to September 2015, companies with woman business leaders scored an average of 10.1% return on equity as compared with 7.4% for those firms without women on boards.
- Companies with poor representation of women leaders had to face more controversies. 24% more governance related issues and corporate scandals than the average hit them.
- Companies where the CEO is a woman were more likely to have more than one woman on the board.
- US Companies were more likely to appoint a female CEO and a CFO than their European counterparts, even while lagging in selecting women directors.
A previous study by Grant Thornton of the listed companies in US, UK and India revealed that diverse executive boards outperform peers run by all-male boards. Opportunity costs for the all-male boards (in relation to the return on assets) for all 3 markets combined, stood at a staggering US$655 billion for the year 2014.
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Companies need to make conscious effort to boost performance through board diversity and ensuring female participation for executive roles. The investors, instead of waiting for quotas and mandates can put positive pressure on companies to have gender balanced boards. Lastly, governments should plan certain incentives for mixed executive boards, as they are known to generate higher productivity and return on assets that ultimately strengthen the global economy.
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