The Bottom Line: Corporate Performance and Women’s Representation on Board

Research shows that Fortune 500 companies with higher percentages of women on their board of directors outperform other companies.

December 20, 2007
by Catalyst

The most recent Catalyst study looked at three commonly used measures of company financial performance — return on equity (ROE), return on sales (ROS) and return on invested capital (ROIC) — from 2001 to 2004 in conjunction with women board director data from Catalyst censuses from 2001 and 2003. It found that, in terms of ROE, companies with the highest percentages of women board directors outperformed companies with the lowest percentages of women board directors by 53 percent (see Figure 1). For ROS, the number was 42 percent (see Figure 2) and for ROIC, the number was 66 percent (see Figure 3).

These numbers aren’t just a result of a few high-performing companies or industries. As you can see from Table 1, the link between corporate performance and women board directors holds across industries.

In addition, corporate performance is stronger than average at companies with at least three women board directors, as Figure 4 illustrates.

These results follow Catalyst’s 2004 report,The Bottom Line: Connecting Corporate Performance and Gender Diversity, which showed that the Fortune 500 companies with the highest percentages of women corporate officers experienced, on average, a 35.1 percent higher return on equity (ROE) and 34.0 percent higher total return to shareholders (TRS) than did those with the lowest percentages of women corporate officers.

While none of this data proves or implies causation, the fact that women board directors and women corporate officers go hand-in-hand with high corporate performance adds to the business case for diversity at organizations, which Catalyst continues to study.

This study was authored by Lois Joy, Ph.D., Director, Research, and Nancy M. Carter, Ph.D., Vice President, Research, at Catalyst Inc. and by Harvey M. Wagner, Ph.D., Professor, Kenan-Flagler Business School, University of North Carolina, Chapel Hill, and Sriram Narayanan, Ph.D., Assistant Professor, Eli Broad School of Business, Michigan State University,
East Lansing.

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Founded in 1962,Catalyst is the leading nonprofit corporate membership research and advisory organization working globally with businesses and the professions to build inclusive environments and expand opportunities for women and business. For more information on this report and to see its appendices, which list the companies with highest and lowest percentages of women board directors, visitwww.catalyst.org.