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posted by janrinok on Thursday November 28 2019, @04:31PM   Printer-friendly
from the shortsighted dept.

Submitted via IRC for Runaway1956

Company Stock Prices Fall When Women Are Added To Boards Of Directors

Turns out that many companies who seek to embrace equality by any means could actually be doing their shareholders a disservice. But hey, we thought equality of outcome was a guaranteed fast track to utopia! What happened?

In fact, many companies experience stock price declines when women are added to the board of directors, Bloomberg points out.

An analysis of 14 years of market returns across almost 1,900 companies recently revealed that when companies appoint female directors, they experienced two years of stock declines. Companies saw their stock fall by an average of 2.3% just from adding one additional woman to their board.

Kaisa Snellman, an assistant professor of organizational behavior at INSEAD business school and a co-author of the study said: "Shareholders penalize these companies, despite the fact that increased gender diversity doesn't have a material effect on a company's return on assets. Nothing happens to the actual value of the companies. It's just the perceptions that change."

The study suggests that investor biases are to blame. The study asked senior managers with MBAs to read fictional press releases announcing new board members. The statements were identical, but for the gender of the incoming director.Participants said that men were more likely to care about profits and less about social values, while women were deemed to be "softer".

Snellman continued: "If anyone is biased, it is the market. Investors should consider organizations that add women and other under-represented groups to their boards because there's a good chance that company is being undervalued."

Despite this study's findings, other non-academic reports over the years have suggested that diverse leadership results in corporate success. A McKinsey analysis concluded that board diversity correlates with positive financial performance and a 2019 Credit Suisse report noted a "performance premium for board diversity".

These findings have prompted investors like BlackRock to push for diversity on boards. Women now account for more than 25% of board members on the S&P 500 and 20% of boards globally.


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  • (Score: 1, Informative) by Anonymous Coward on Thursday November 28 2019, @08:15PM (4 children)

    by Anonymous Coward on Thursday November 28 2019, @08:15PM (#925750)

    What skill set is needed to fill a chair on the board of directors? Directors do long term and general planning. Any details are handled by the C-suite, CEO, CFO, etc..

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  • (Score: 2, Insightful) by khallow on Thursday November 28 2019, @11:35PM (2 children)

    by khallow (3766) Subscriber Badge on Thursday November 28 2019, @11:35PM (#925802) Journal

    What skill set is needed to fill a chair on the board of directors? Directors do long term and general planning.

    Well, there you go: long term and general business planning. Good of you to answer your own question.

    • (Score: 0) by Anonymous Coward on Friday November 29 2019, @04:14AM (1 child)

      by Anonymous Coward on Friday November 29 2019, @04:14AM (#925920)

      Except long term and general planning have more in common with crystal balls than any skill. Predicting the future doesn't really work well.

      • (Score: 1) by khallow on Friday November 29 2019, @04:29AM

        by khallow (3766) Subscriber Badge on Friday November 29 2019, @04:29AM (#925924) Journal

        Except long term and general planning have more in common with crystal balls than any skill. Predicting the future doesn't really work well.

        The two aren't equivalent. And skill applies to both despite your assertion to the contrary.

  • (Score: 4, Insightful) by Anonymous Coward on Friday November 29 2019, @01:25AM

    by Anonymous Coward on Friday November 29 2019, @01:25AM (#925840)

    What skill set is needed to fill a chair on the board of directors?

    Knowing someone from the Ivy League college you graduated from who's already on the board or another board. Being the CEO of company A helps get you on a board of company B, since then you can help the CEO of company B get onto the board of company A. Having a congresscritter or two in your pocket helps, as well as having turned the high mucky-mucks of whatever government agency 'regulates' you into your paid lackeys.

    Don't overlook the power of mutually assured destruction. It's easier to get onto the board when you have proof that fellow director Bob beats his children and that fellow director Bill raped an intern, and they both trust you to keep quiet because they have pictures of you having carnal knowledge of a goat.

    Business knowledge is nice, but rarely important.