Catalyst, a nonprofit research organization devoted to advancing the cause of equality for women in the workplace, recently released the results of its report, The Bottom Line: Corporate Performance and Women’s Representation on Boards. The study revealed that Fortune 500 companies with women board directors performed exponentially better than those with no women board directors.
More specifically, Catalyst compared Fortune 500 companies based on three important financial indicators–return on equity (ROE), return on sales (ROS) and return on invested capital (ROIC)–then surveyed them to find the number of women board directors.
When it came to return on equity (ratio of after-tax net profit to stockholders’ equity), companies with more women board directors outperformed those with the least by 53%. For return on sales (pre-tax net profit divided by revenue), companies with more women board directors outperformed those with the least by 42%. And, for return on invested capital (ratio of after-tax net operating profit to invested capital), companies with more women board directors outperformed those with the least by 66%!
So, what’s the magic number of women board directors? Believe it or not, it takes at least 3 to move the needle.
Companies with three or more women board directors demonstrated stronger than average financial performance (16.7% ROE versus an average ROE of 11.5%; 16.8% ROS versus an average ROE of 11.5% and 10% ROIC versus an average ROIC of 6.2%).
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