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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.
(Score: 2) by Reziac on Friday November 29 2019, @02:27AM (1 child)
... have the first clue who is on the board? Most buy stocks through a broker or a 401k and never pay any attention to who runs the company. I'd hazard most aren't aware at ALL if a female is or is not on the board, and couldn't name a single CEO or board member.
If stock prices fall when more women are present, I'd hazard it's due to policy shifts toward shorter-term thinking, like what happened when Carly Fiorina was in charge at HP. Short-term thinking tends to have short-term benefits but over the long haul, damages the company, and stock prices reflect that.
And there is no Alkibiades to come back and save us from ourselves.
(Score: 0) by Anonymous Coward on Friday November 29 2019, @05:55AM
"If stock prices fall when more women are present, I'd hazard it's due to policy shifts toward shorter-term thinking, like what happened when Carly Fiorina was in charge at HP. Short-term thinking tends to have short-term benefits but over the long haul, damages the company, and stock prices reflect that."
<sarcasm>Riiiight! Because most male company board members are much better forward-thinking visionaries than women!!!</sarcasm> If you truly believe that your typical male board member is looking further out into the future than the next quarterly earnings report then I have a really great deal on a bridge for you.