From an interview with MSCI’s Howard Sherman:
A growing body of research has found an interesting link between board diversity and various measures of corporate performance. For example, Credit Suisse found 5% outperformance on a sector-neutral basis for companies that had at least one woman on the board from the start of 2012 to June 2014. This amounted to a compound excess return since 2005 of 3.3% (Credit Suisse, The CS Gender 3000: Women in Senior Management, September 2014).In our own Women on Boards 2014 report, we found that companies in the MSCI All Country World Index (ACWI) with a higher percentage of women on the board had fewer instances of bribery, fraud and corruption, and that companies with at least one female director had a higher Return on Equity. We also found a positive correlation between the proportion of women on a board and our Environmental Social and Governance (ESG) rating of a company. In our Women on Boards 2015 report, we found that companies in the MSCI World Index with strong female leadership generated a Return on Equity of 10.1% per year versus 7.4% for those without. In addition to this, a superior average valuation (price-to-book ratio of 1.76 versus 1.56) has been found, compared to those companies without strong female leadership. Companies lacking board diversity also suffered more governance-related controversies than average.The real question is whether this is correlation or causation: does having a significant number of women in leadership positions lead to better outcomes? Or, do companies with relatively good governance see board diversity as a natural extension of how they already operate? Either way, board and senior management diversity is becoming an interesting investment signal for investors attuned to the issue.