Gender-balance needed for future health of corporate world - Building Gender Balanced Business

By Alison Maitland

• Studies show women are more careful about risky investments and produce better long-term performance
• Women-run hedge funds make better than average annualised returns
• A study showed that venture-backed companies run by women produce higher revenue than average with less capital used
• Mixed-gender investment clubs perform better according to one study
• New reward systems are needed in the finance sector to tie performance to long-term results

“This is the first time, to my knowledge, that male business leaders have got together to make a public call for change on the gender issue. It is a welcome initiative that will surely play a role in incorporating gender balance into the construction of a safer, saner global financial system.”

In our book, Why Women Mean Business, Avivah Wittenberg-Cox and I explain the enormous significance for countries and companies of the feminisation of the talent pool and the marketplace, and the links between gender-balanced leadership, performance and profitability.

There is another central contribution that women can make as our governments, businesses and regulators ponder how to rebuild the damaged capitalist system – a more level-headed approach to risk. Studies show that women are more careful about risky investments, trade less frequently than men, and produce better long-term performance.

The Hedge Fund Research “Diversity Index”, for example, shows that women-run hedge funds (which are a small minority of the total) make much better than average annualised returns, and consistently over time.

Long-term value creation is what we need to focus on. We also need sounder financial management. Research from Library House last year found that, of 600 venture-backed companies across Europe with disclosed revenues and investment histories, the tiny minority run by women chief executives produced higher revenues on average, using less capital.

Another telling survey, this one by Creditsafe, a specialist in credit information, found that women-run businesses and those with mixed-gender boards paid suppliers’ invoices more quickly and were faster at collecting money owed to them than male-run businesses, and so had better cash flow.

All of this, and much more, points to the positive impact of gender-balanced teams. Brooke Harrington, author of Pop Finance, studied the performance of male, female and mixed-gender investment clubs. The male clubs slightly lagged the S&P 500 each year on average, and the female clubs just beat it. But the more significant out-performers were the mixed clubs. Harrington found that men picked work-related stocks and women picked consumer stocks, so the mixed clubs had more diversified portfolios. Makes sense!

“Another telling survey, this one by Creditsafe, a specialist in credit information, found that women-run businesses and those with mixed-gender boards paid suppliers’ invoices more quickly and were faster at collecting money owed to them than male-run businesses, and so had better cash flow.”

So where should we start to make change? Pascale Alvanitakis-Guély, a managing director with responsibility for hedge funds coverage at Nomura Lehman investment banking in London, is clear that new reward systems are needed in the financial world to tie incentives to long-term performance.

“These would take into consideration an individual’s or a company’s performance over several years and reward consistency while penalising excessive volatility of results,” she told me. “A bonus should be a reward built over years, not just months, with a claw back mechanism for loss-making years.”

And there would be a crucial spin-off in gender terms. “I believe that such new policies would also help reduce the gap in compensation and promotion between men and women in banking given that women tend to be less comfortable with excessive risk-taking and prefer to work to more long-term objectives.”

Alison Maitland is a business writer, conference speaker and moderator and co-author with Avivah Wittenberg-Cox of the book, Why Women Mean Business: Understanding the emergence of our next economic revolution (Wiley, 2008). Alison worked for 20 years as a journalist at the Financial Times including eight years as its management writer. Alison is also a senior columnist at WOMEN-omics.com.