Women in boardrooms: Fair and profitable

The absence of women on corporate boards and in other high-level positions could signal a weaker business outlook for many companies

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Female participation in corporate boardrooms is improving, albeit slowly. However, the absence of women on corporate boards and in other high-level positions could signal a weaker business outlook for many companies.

Diversity in its many forms helps foster better decision making within organizations. Having too many of the same types of people gathered in groups to make decisions can easily result in groupthink, which can endanger a robust business process. (In other words, just say no to the yes-men.)

A 2009 survey conducted by Catalyst, a non-profit advocate for females in the workplace, showed that between 2005 and 2009, Fortune 500 companies with three or more female directors outperformed firms with fewer women on their boards; the average return on equity was in fact 43% better.

Regardless, many corporations and their shareholders haven't quite gotten the message that this isn't just about fairness; it makes real business sense.

GMI Ratings' Nathaniel Flannery recently called out 10 global companies with zero women on their boards. Big names included Under Armour (NYSE: UA), Fiat, Samsung, and Anheuser-Busch InBev (NYSE: BUD).

Furthermore, there's something ridiculous about companies that appeal strongly to female demographics lacking female perspective on their boards. Last year, companies with major female demographics, like Urban Outfitters (Nasdaq: URBN) , and Crocs (Nasdaq: CROX) , were all called out for having no women on their boards. Crocs has since added one female board member.

You'd think a young social media company wouldn't be backward and antisocial, but think again. Plentiful red flags wave around Facebook's IPO, and one of them is the lack of women on its board of directors.

This comes across as weirdly anachronistic for such a young company. It also seems odd because Facebook Chief Operating Officer Sheryl Sandberg has an extremely impressive resume and is far more seasoned than youthful CEO Mark Zuckerberg. In the demographic sense, 58% of Facebook users are female. Um, hello?

Here in Australia, only 10.9% of directorship positions in ASX200 companies were held by women, and 87 still do not have a woman on their board, according to the Boardroom Diversity Index published by advocacy and support organisation, Women On Boards.

Studies also show that women tend to be less likely to take dangerous risks or be overconfident. They're also more patient and less layoff-happy than their male co-workers. Layoffs are the perfect example of our current problem with short-term mentality. Over the long haul, cultures that too easily cut workforces can ruin your investing future.

In other words, female progress in boardrooms isn't just a social or political "thing" – it should result in more stable, dependable profits and stronger companies over the very long haul. When companies lack the valuable asset of female participation in boards and other leadership roles, they could become the most lacklustre components of your portfolio.

If you are looking for ASX investing ideas, look no further than "The Motley Fool's Top Stock for 2012." In this free report, Investment Analyst Dean Morel names his top pick for 2012…and beyond. Click here now to find out the name of this small but growing telecommunications company. But hurry – the report is free for only a limited period of time.

More reading

The Motley Fool's purpose is to educate, amuse and enrich investors. This article contains general investment advice only (under AFSL 400691).

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »