Impact Blog
Women in leadership: boosting the bottom line

The views expressed in these posts are those of the authors and are current only through the date stated. These views are subject to change at any time based upon market or other conditions, and Calvert disclaims any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions for Calvert are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Calvert fund. References to individual companies for Engagement or Research purposes are provided for illustrative purposes only and may not be representative of the results of all of Calvert’s engagement efforts. The discussion herein is general in nature and is provided for informational purposes only. There is no guarantee as to its accuracy or completeness. Past performance is no guarantee of future results.

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      By Calvert Research and Management

      Washington - Recent research demonstrates the value of gender diversity at all levels of the corporate structure, particularly at the higher echelons of the boardroom and C-suite. Studies link a greater female presence with many metrics of increased corporate financial success.

      The most robust body of research links board gender diversity to positive business performance. A study by MSCI found that companies with at least three women on their boards had median increases of 10% in return-on-equity (ROE) and 37% on earnings-per-share (EPS) from 2011-16. In contrast, those with no women had median decreases of 1% and 8%, respectively, over the same period. Furthermore, adding any number of female directors correlated with higher increases in EPS compared to losing women from the board during the same period.1 Credit Suisse linked board diversity to higher equity, lower leverage, and higher price/book ratios in 2012, 2014, and 2016.2

      Similar findings apply to executive leadership. A 2016 study by Peterson Institute for International Economics analyzed almost 22,000 firms globally and found a repeated and significant link between higher level of females in C-suite management and firm profitability.3 In a 2018 analysis, McKinsey found that companies in the top quartile for gender diversity on executive teams were 21% more likely to outperform on profitability and 27% more likely to have superior value creation, affirming similar findings from a 2015 study.4

      These trends are harder to measure at the employee level due to less robust corporate disclosure. However, gender-diverse teams are associated with innovation and market opportunities. In 2017 and 2018, the Boston Consulting Group examined revenue tied to recently launched products and services, concluding that revenue rose when the proportion of female managers eclipsed 20%.5

      Countries mandating more women on boards

      In some countries, government intervention has pushed companies to focus on changing board-election processes to better reflect the available pool of diverse director talent. Norway started the push in 2003 with its requirement that 40% of company boards be female, and momentum has increased worldwide since then. These strong regulations and guidance are indicative of growing government interest in assuring that companies under their jurisdiction stay current with best competitive practices.

      The United States is the notable G7 country without formal government requirements or targets to advance gender equity in the private sector.

      Calvert Blog 7-11-19

      Investors are also increasingly pressuring companies to diversify. In fact, 53% of U.S investors think companies should take a public stand on workplace diversity and 57% strongly agree that board and executive diversity affect their trust when considering investing in or recommending a company.6

      The 2017 launch of the CEO Action for Diversity and Inclusion — in which more than 500 CEOs pledged to improve workplace programs and training, share best practices, and track progress — indicates that executives are listening.

      Our Goals

      Calvert — through direct conversation, proxy voting, and shareholder resolutions — urges portfolio companies to improve their gender-diversity approach. In 2004, the Calvert Women's Principles became the first corporate code of conduct focused on empowering and advancing women in the workplace; more than 1,800 global business leaders have adopted them. We are an active member of the Thirty Percent Coalition, which comprises institutional investors that coordinate engagement strategy.

      Calvert also takes a comprehensive approach to incorporating gender diversity into our proxy voting. We support proposals requesting that companies adopt policies or nominating committee charters to assure that diversity is a key attribute of every director search. We also oppose individual directors who serve as members of the nominating committee if the board lacks at least one woman and one person of color, and the board is not at least 30 percent diverse. By voting proxies of portfolio companies in this way, we are able translate a strong commitment to diversity broadly across the thousands of companies held in Calvert strategies.

      Bottom line: Companies with greater gender diversity, especially in the top ranks, have competitive advantages — affecting reputation, investor confidence, and financial performance.

      To read "Evaluating the Glass Ceiling: Understanding and unlocking the value in gender equity," click here.