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Companies with more women at the top performed better

Diversity was a great return on investment for companies during pandemic

There are plenty of arguments for why companies should make diversity at the workplace – especially at top positions – a priority. It seems that money is one of them.

A new data analysis compiled by non-profit BoardReady showed that in the pandemic-era there is a strong correlation between board diversity and revenue growth. Companies with diverse boards usually did better than their less-diverse counterparts, when measured by revenue growth in 2020.

BoardReady looked at the performance of S&P 500 companies for the calendar years 2018, 2019 and 2020, based on data that the organisation collected from publicly available data sources.

When looking at companies with higher gender diversity, researchers found that 54% of them delivered positive year-over-year revenue in 2020. In contrast, positive results were achieved by only 45% of the companies with lower gender diversity.

It goes without saying that the pandemic was hard on many businesses. According to the analysis, revenue for all of the 500 companies combined was lower by $225 billion for 2020 than it had been in 2019. But among the 194 companies with higher gender diversity, year-over-year revenue grew overall by $58 billion (1.2%) versus a $283 billion (3.9%) drop for companies with lower gender diversity. 

Year-over-year revenue growth for 2020 tended to be higher for companies with better gender balance on their boards.

Companies with diverse boards did better

The analysis also showed that eear-over-year revenue growth for 2020 tended to be higher for companies with better gender balance on their boards.

Indeed, companies whose boards had higher gender diversity saw their growth rate fall from 5.0% in 2019, to minus 3.1% in 2020, a drop of only 3.8%.

On the other hand, companies whose boards had lower gender diversity, saw their growth rate plunge from negative 0.4% in 2019 to negative 8.3% in 2020. This was a decline in growth rate of 7.9%. Companies whose boards had moderate gender diversity, saw their growth rates fall almost as much, from 3.7% growth rate in 2019 to minus 3.1% in 2020, a 6.8% reduction.

Digging more into the report, we can also see that companies where women held more than 30% of board seats outperformed their peers in 11 of 15 sectors, while companies with at least 30% of seats held by non-white directors saw year-over-year revenue grow by 4%. Those with less racially diverse boards had a revenue decline.

Report

What about diversity in sectors that performed poorly and those that performed well?

According to the report, the two largest sectors in the S&P 500 that performed poorly overall are Transportation and Energy.

However, transportation companies with higher gender diversity saw their revenue decline slightly by 1.2%. Meanwhile, companies with lower gender diversity saw 2020 year-over-year revenue decline by a whopping 48.2%.

On the other hand, the two sectors in the S&P 500 that performed well in 2020 are Retail and Computer Software.

Retailers with higher gender diversity saw their revenue grow by 14.4% year-over-year in 2020, while retailers with lower gender diversity grew by 9.9%. Computer Software showed a similar trend, with companies with higher gender diversity growing 14.9%, versus a 7.7% increase for their less-gender-diverse counterparts.

Companies where women held more than 30% of board seats outperformed their peers in 11 of 15 sectors.

To sum up: The report shows a strong correlation between board diversity and performance. Companies – as well as whole sectors – with diverse boards generally did better in the pandemic than their less-diverse counterparts, when measured by revenue growth.

Correlation doesn’t prove causation, of course. Nonetheless, it’s suggestive that companies with diverse boards usually did better in the pandemic than their less-diverse counterparts, even if the report can’t prove why.

“Is it that diverse boards make companies better? Or is it that better companies tend to recruit diverse boards? Perhaps it is a bit of both. Regardless, companies lacking board diversity might reasonably consider whether they are on the wrong side of corporate history – and success.”

report on board diversity

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