More women at the top boosts share prices

Recent research by Bank of America Merrill Lynch shows that employing more women at the top is excellent for share prices. All male boards will soon have to let more women in, not because they like to share power, but because this is what moves the money.

Photo by Chris Liverani on Unpslash

Women now have more economic power than ever. Since the mid-1990s women have entered the workforce in serious numbers. Between the ages of 30-34 9.5% more women have university degrees than men in the European Union, and according to BofA Merrill Lynch this is the case in the U.S. too. In 40% of U.S. families, women are the breadwinners. This obviously drives change in terms of spending, investment, and in who does the housework. Often, this work gets outsourced, creating another economic drive.

Women make up 40% of the workforce worldwide, the BofA Merill Lynch study shows. The paid workforce, I assume, because still everywhere most of the unpaid household chores are done by women, even if they have a paid job. But of those women who have enough money to invest, 88% want to do so in organisations that promote social well-being. This is an especially strong trend among millennials, the generation that will soon be running the world. Companies might want to start looking at their impact, if they want to attract these investors.

If women were paid the same as men tomorrow, the study estimates that $28 trillion could be added to the global economy in less than a decade. At the rate we’re going now, it will take 170 years for women’s pay checks to catch up, the study claims. I’m confident, however, the pay gap will close up sooner than that. The researchers proved beyond doubt that gender balance helps a company become more successful. Stocks of companies with gender diversity, especially at the top, perform better than those with an all male leadership (executives, board members and management). They show consistently higher return on equity, lower earnings risk and less volatility.

Investors are only starting to look at these dynamics, but it’s just a matter of time before gender-related statistics will be among the essential data to consider when putting together an investment portfolio. A company with less risk deserves a higher premium, and employing enough women throughout the company achieves this.

Already this budding trend is driving more and more funds into what Savita Subramanian, who lead the research, calls ‘responsibly run’ companies. Investment of U.S. assets into companies that focus on gender diversity or equality has grown at an impressive 80% annualized rate over the last three years.

Photo by Rawpix on Unsplash

Gender diversity is not just about the number of women that a company employs, but about the dynamic they bring. Women do things the feminine way: we are naturally risk-averse, we have a holistic outlook, and tend to contribute to a better work climate because we are ‘programmed’ by evolution to want everybody to get on with each other. That is an important factor that helps companies thrive.

Programs like my own Sustainable Leadership for Women aim to assist organisations and companies in bringing out the best in both women and men, and become aware of how they can best support the women on their team. I especially help women overcome their inhibitions to stepping up their game, which is the down-side of risk-aversion and other feminine traits. This way we can make the most of our differences. That is true diversity.

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