Encouraging findings have emerged from a Credit Suisse study of how gender diversity has developed across 3,100 firms around the world over the past three years. [1]

Entitled The CS Gender 3,000 in 2019: The Changing Face of Companies, the report points out: “Companies with at least 5% of women on boards have an average of 18% women in management. This proportion increases as the percentage of women on boards rises in all three years under analysis, suggesting that the impact of greater diversity in the boardroom leads to a better gender balance in executive functions. At the 50% level of board representation, we find nearly 30% of women in management.”

On the specific point of performance, the report is also very positive, stating: “Our analysis continues to reflect, by way of the correlation observed, a performance premium among the more gender-diverse companies relative to those that are less diverse. It also finds that the premium is in fact greater when contrasting diversity measured by differentiating representation in the executive team, as compared to our prior boardroom analysis.”

This was particularly apparent when the researchers focused purely on family firms. “Given that family-owned companies also seem to outperform broader equity markets,” the report says, “we have analysed whether the combination of family ownership and gender diversity enhances outperformance further. In other words, do diverse family-owned companies outperform family-owned companies that are less diverse?”

The report notes: “First, we see that over the past five years, family-owned companies with at least one female executive have outperformed male-only family-owned companies in every year. At the time of writing, the active return on an investment – or ‘alpha’ – stands at close to 400 basis points. Second, we find that the degree of alpha generation increases with the share of female representation. For example, since December 2014, family-owned companies with at least 30% female executives have outperformed male-only family-owned companies by around 540 basis points. This compares to 530 basis points for companies with over 20% female executives and 410 basis points for companies with at least 10% female executives.”

Credit Suisse global head of diversity and inclusion Patsy Doerr said: “It is heartening to see progress being made in most parts of the world to ensure female progression and promotion in the senior positions of the workplace. Though the business case for doing so has long been known, studies such as [this] mean we are able to draw ever-clearer conclusions as to how we can achieve an equitable and inclusive workforce. That being said, we are still a long way off achieving workplace parity.”

Doerr’s colleague Richard Kersley, head of global thematic research at Credit Suisse, added: “In our view, an understanding of diversity in executive management is of crucial importance if one wishes to really assess the impact of enhanced diversity in the workplace and its specific relevance for shareholders.”

He stressed: “We do not assert cause and effect in our research but let the data speak. We find a material correlation between gender diversity and corporate performance.”

What should businesses learn from the findings – and is Credit Suisse right to stop short of asserting cause and effect?

The Institute of Leadership & Management’s head of research, policy and standards Kate Cooper says: “It’s so interesting that we have a growing body of evidence to say there’s a business case for inclusivity. When you have female role models in senior positions, that will naturally translate into new expectations and a sense of validation for more junior women. It tells them that they, too, can attain these senior roles.”

She notes: “The family-business data in particular is brilliant. It’s hard evidence that these companies are outperforming their less-diverse counterparts – but we mustn’t fall into the trap of thinking that each new piece of research like this is reinventing the wheel and telling us something that we didn’t already know. As admirable, thorough and well presented as the Credit Suisse report is, it’s in many ways confirmatory. The data does indeed speak for itself.”

Cooper adds: “Well done to Credit Suisse for providing such a valuable contribution to this debate, and keep up the research. It is particularly important to maintain a steady flow of this type of data into the discourse if you consider representation – as many organisations do – a goal in and of itself. If representation is handled with integrity and yields the sorts of results that have a positive influence on the bottom line, then other, related targets – such as closing gender pay gaps – will follow suit.”

For further insights on the themes raised in this blog, check out the Institute’s resources on appreciating diversity

Source ref: [1]

Image of Credit Suisse HQ courtesy of Denis Linine, via Shutterstock

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