MSCI on the benefits of women in leadership roles.
Our latest research shows that companies in the MSCI World Index with strong female leadership (as defined in our paper) generated a Return on Equity of 10.1% per year versus 7.4% for those without (as of September 9, 2015, measured on an equal-weighted basis). We did not find a direct causal link between women directors and better outcomes.
Academic research in management and psychology has long shown that groups with more diverse compositions tended to be more innovative and make better decisions (some researchers believe that women are more risk averse). In our research, we found that companies lacking board diversity suffered more governance-related controversies than average. We did not, however, find strong evidence that having more women in board positions indicates greater risk aversion.The possibility of performance benefits coupled with non-financial studies suggesting diversity could improve decision-making have been cited by both global asset owners and advocacy groups in support of efforts to promote a 30% global female director goal. MSCI ESG Research estimates that, based on current “business as usual” trends, women are unlikely to comprise 30% of directorships in publicly held companies until 2027. Based on two alternative approaches, it may be possible to achieve the 30% target at a faster pace. The Accelerated Conversion approach would double the proportion of new board seats taken by women reducing the 30% estimate by five years, and;The Accelerated Turnover approach would keep the current rate of women taking new board seats at the historical rate, but turnover of existing board seats could increase resulting in a less disruptive “refresh” achieving the 30% target by 2020.