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Less than a third of company board seats are currently held by women, although there is evidence that gender diversity on boards can lead to higher credit ratings and improve stock performance.
Women are gaining place in the boardroom. According to Moody’s Investors Service, by 2022, 29% of the board seats of companies in North America and Europe will be held by women, up from 24% two years ago. Among North American companies, the number of seats occupied by women rose to 27% from 22%, the data showed.
A company’s board of directors has significant influence over the company’s business, including setting policies, overseeing assets, and hiring and directing executive staff. According to Moody’s, a higher percentage of women on the board of directors is correlated with a higher credit rating.
The ratings agency said: “We consider the presence of women on the board – and the diversity of opinions they offer – as supportive of good corporate governance, which is positive for credit quality,” the rating agency said.
Meanwhile, anecdotally, stocks of companies with low female representation have underperformed.
Canadian Oilfield Services Company Calfrac Well . Servicenatural gas producer Canacol Energy and based in Ontario Morguard Real Estate Investment Trust According to Doug Morrow, director of ESG strategy at BMO Capital Markets, there is the least gender diversity, with an all-male board and executive team. All three companies have performed poorly by their industry standards over the past year.
“While there is no clear relationship between gender diversity and stock returns, we believe that diversified organizations offer an inherent advantage over undiversified and well-equipped institutions,” said Morrow. better equipped to compete and outperform in the long run.
Government mandates and pressure from large institutional investors have fostered gender diversity at the board level over the years.
In California, more than 600 public companies are now required to have a minimum number of women on their boards, or they could face fines of up to $300,000. Large institutional investors such as Vanguard and Black stones had a record of voting against the directors of the all-male council.
Meanwhile, the Securities and Exchange Commission Approves new Nasdaq rules that would require most U.S. companies to have at least one female director in addition to another board member who identifies as a member of a racial minority or LGBTQ community.
Historically, however, women have trailed men in power and influence at the board level, particularly in the energy and natural resources industries.
“Improving diversity in these industries, as well as mining, has been a long-standing challenge, and it is not clear that the status quo has changed significantly in recent years,” Morrow said.
