Does Boardroom Diversity Affect the Bottom Line?

Move over, guys. It's time to welcome more women into the boardroom.

Of course, equal opportunity is a virtue unto itself. But consider this: Having more female directors in your midst will also improve the corporate bottom line, according to a new study by a nonprofit group.

Large corporations with the highest representation of women board members significantly outperformed those with the highest concentration of men, according to a report released today by Catalyst, a New York research organization founded to promote women in the business world.

The study, titled "The Bottom Line: Corporate Performance and Women's Representation on Boards," also found that corporations with three or more women directors performed notably better than companies with less gender diversity.

"Diversity well managed results in great performance," Deborah M. Soon, Catalyst's vice president of executive leadership initiatives, said. "It signals the value the company places on cultivating an environment of openness, broader discussions and thinking out of the box.

"In this global environment," Soon added, "companies have to be fast-moving. If you have an environment where diversity is the norm, there is more likelihood of uncovering opportunities."

On average, corporations with the highest percentage of women board directors attained 53 percent higher return on equity, 42 percent higher return on sales and 66 percent higher return on capital than those with the least gender diversity.

The study, which reviewed data from Fortune 500 companies between 2001 and 2004, found that diversity is associated with higher performance across industries, including traditionally male-dominated sectors like construction and mining.

"Almost all companies with zero women on their board are in the lowest quartile" of performers, Soon says. "There is a tangible value to a highly diversified board."

The report is a follow-up to Catalyst's 2004 study that found that corporations with more women operating officers significantly outperformed companies with all-male executive suites.

by Caitlin Liu