UPDATED: Study shows it pays to have women on company boards

It's official: increasing the number of women on boards of directors is good for business.

It's official: increasing the number of women on boards of directors is good for business.

The University of Waikato’s Institute for Business Research analysed 10 years of data from NZX companies and found that upping the number of female board members  improved financial performance.

Director Dr Stuart Locke said the average percentage of women on NZX top 100 boards was 9.3 percent, compared to 41 percent on public sector boards.

“In global terms New Zealand does not rank well based on NZX figures, which is surprising given the number of women university graduates,” he said.

“Most companies seem to ignore the talent available and their shareholders pay the price.”

New Zealand Global Women said the findings further validated international studies that showed having more women on boards improved companies’ profitability.

“Independent studies in the United States, the United Kingdom and Europe have linked gender diversity on boards to improved corporate performance of up to 35 percent,” said executive director Faye Langdon.

“Australian research concluded that if they can close the gender gap its GDP would improve by 11 percent.”

Langdon said women and men bring different ideas and qualities to leadership, strategy and governance roles.

“A diverse board, with both men and women, is a better board,” she said. “Diverse boards are proven to deliver greater returns to shareholders and a more secure future for all stakeholders, including employees, through bull and bear markets.”

Last month Goldman Sachs issued a report suggesting that closing the gender gap and increasing female productivity in the workplace could boost New Zealand GDP by 10 percent.

Two years ago the company also released a study on Australian female labour force participation and productivity with similar findings.

Goldman Sachs recommended a number of ways to address the gap, including potentially introducing  specific targets on company boards, or following the Australian  exchange's lead in introducing increased disclosure requirements.

The Australian exchange has altered its rules, leading to a 50 percent jump in female representation on boards in less than two years. The policy recommends public  companies have a gender diversity policy.

The New Zealand proposal calls for it to be mandatory and goes beyond gender diversity to include ethnic diversity. New rules would also require all publicly-listed companies to declare the composition of their boards, stating how many women and minorities
they have as directors and in senior roles.

But Locke said although women are associated positively with financial performance in New Zealand, the same is not necessarily true in all economies.

“It’s certainly not a given. Take Sri Lanka for example; female directors are often spouses of the business owner and only there so the business can distribute income at a lower marginal tax rate," he said.

"They’re not expected to know anything about the business and even the courts recognise their lack of input and do not hold them accountable for any decision-making.”

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