Build a Better Board

If you’re looking for a solid investment, you could do worse than to choose a company with at least one woman on the board: those companies outperform companies without female directors.

That’s the finding of a report from the Credit Suisse Research Institute, which analyzed the performance of 2,360 public companies worldwide between 2006 and 2012. Over that period, the stocks of companies with women on their boards posted higher average returns on equity, better growth, and lower volatility than similar companies without women board members. The difference was most pronounced during the recession and postrecession period beginning in 2008.

How do women board members contribute to better outcomes? The authors suggest that they deliver the following.

Effective leadership skills. Women tend to define responsibilities clearly and place a high value on mentoring and coaching employees, research shows.

Encouragement of increased effort.
When minority groups are present, studies have found that members of the majority group make a greater effort. Having women on the board may promote stronger performance across the board.

Deep understanding of customer needs.
Women board members are often more closely attuned to the wants and needs of women, who hold sway over most household purchasing decisions.

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