Indian companies with diverse executive boards outperform peers run by all-male boards, according to a research by Grant Thornton. The study, which covers listed companies in India, UK and US, estimates the opportunity cost for companies with male-only executive boards (in terms of lower returns on assets) at a staggering $655 billion in 2014 where India’s share is $14 billion.
The numbers are revealed in Women in business: the value of diversity, a report from Grant Thornton scrutinising the financial performance of companies listed on the S&P 500, CNX 200 and FTSE 350. Although acknowledging the progress made by women at a non-executive level, the report focused on whether diverse executive teams – the people involved in day-to-day business operations – outperform male-only peers.
Analysis of the return on assets ratio (also known as return on investment) showed that, on average, companies with at least one female executive board member outperformed those with male-only boards in each of the three markets analysed.
“Our recent research and report shows that women executives can add tremendous value to businesses through better decision making,” said Vidya Rajarao, Partner, Grant Thornton India LLP. Research clearly demonstrates that board diversity is a good thing and companies in India should provide more opportunities to women so that they can not only become business leaders but at the same time build sustainable businesses and provide different perspectives in corporate decision making, management style and leadership, Rajarao said.
“Corporate India should take the lead in empowering women in their organisation, induct professional woman directors as Board members and truly respect gender diversity in letter and spirit since it is now undisputed that boards with women outperform male only boards. So, having women board members and women leaders make good business sense in terms of ROI, profitability and employee morale.”
“The message from our research is clear: there is a large opportunity cost for companies associated with male-only executive boards. Those businesses stuck in the past are not fully unlocking their growth potential. Like a world still addicted to fossil fuels, these companies are suffering now. A lack of action now will make it all the more difficult to respond in the future when both problems are likely to be more acute,” said Francesca Lagerberg, global leader for tax services at Grant Thornton.
In the US, S&P 500 companies with diverse boards outperformed rivals by 1.91%. In the UK FTSE 350 the gap was 0.53% and for the Indian CNX 200, 0.85%. This translates into an opportunity cost of $567 billion, $74 billion and $14 billion, in each of the three markets respectively – or around 3% of GDP in the UK and US.
The article appeared in the Economic Times. The article can be found here.