Investors Punish Stocks When Women Join Boards - Building Gender Balanced Business

• Having women — especially a significant number of women — on a board is the best bet for a company: Performance is as good or better in virtually every category according to virtually every study. Except, paradoxically, share price.

• Shareholders seem to sell when a company adds a woman to its board, much as appointing a woman as CEO tends to have an immediate negative impact on a stock.

• The newest proof comes in a University of Exeter study of FTSE-100 companies published in the British Journal of Management. From 2001 to 2005, companies with all-male boards had a market valuation equal to 166% of book value; those with at least one woman on the board came in at just 121%.

• The shares underperformed even though return on assets and return on equity were far higher at companies with women on their boards than those that were all-male. (Stock tip of the day: That makes such stocks good long-term value plays on the FTSE.)

• One possible explanation also comes from the University of Exeter: the so-called glass cliff phenomenon that was co-discovered by Exeter psychology professor S. Alexander Haslam. It holds that women are most likely to be added to executive or board positions when a company is at highest risk of failure … and thus their appointments suggest (past) cause for selling. (See above stock tip.)

• Haslam, who was involved in the newest study as well, said, “Whatever the reason, it is clear that this response is unwarranted, because there is no objective evidence that having female board members damages a company’s performance. If anything, the opposite is true.”

A summary on the study