Shareholders value female directors – look at the share price

Around the world, the movement to get more women on boards of directors in gaining momentum. The move comes in part of the dissatisfaction that all the things we've tried in corporate governance haven't seem to have provided any benefit. If the "problem of corporate governance" is rampant executive pay, without demonstrable downside risk for the executive and without demonstrable upside benefit for shareholders, then clearly not much has happened. The "agenda problem" of the literature is still in full force. If the "problem" is risk management, in which corporate governance is an insurance policy, then the insurer has gone bust. Again. So all the mechanisms of incentive alignment, board independence, structure, procedures and disciplines haven't done the trick. Perhaps it's time to try something else.

According to a study by three Asian-based scholars, there is some evidence that putting women on boards helps the share price. Their working paper uses data on mandatory announcements of new director appointments, and the analysis shows that on average, "shareholders value additions of female directors more than they value additions of male directors". Moreover, companies with workplace practices that promote workplace equality seem to benefit the most from boardroom gender diversity. "This suggests that appointing female directors may help resolve value-decreasing stakeholder conflicts," they conclude.

This isn't just another study. The leader of the research, Renée Adams at the University of Queensland, was author of a related study a couple of years ago that showed rather mixed messages coming for woman on boards. Simplifying a subtle argument a bit too much, they found gender-diverse boards were better at monitoring but less good at strategising.

Source document: The working paper "Does Gender Matter in the Boardroom? Evidence from the Market Reaction to Mandatory New Director Announcements," by Renée Adams and Stephen Gray of the University of Queensland and John Nowland of City University in Hong Kong, is a 55-page pdf file.