The business case for gender diversity
Improving gender balance allows companies to benefit from harnessing all available talent, potentially improving share price performance.
The most successful companies evolve. The average lifespan of a company in the S&P 500, a US stock market index, used to be 33 years in 1964; by 2027 it’s forecast to shrink to just 12.*
A company’s success or failure is largely determined by the quality of its leaders’ decision making and is why the make-up of leadership teams is crucial. To make the best decisions, we believe that this can only come from a group with a diverse set of views. A group of people who are all of the same gender simply cannot be the best forum for debate — the key is cognitive diversity.
Figure 1. Share price performance for baskets of companies with different proportions of female participation in senior management
Fostering inclusive workplaces can play an important role in addressing some of the most important business issues. These include increasing innovation, attracting and retaining talent, enhancing reputation and brand, and generating higher returns, according to some research.**
Many studies conducted in recent years have shown that companies with higher levels of gender diversity perform better relative to the wider stock market. For example, the Credit Suisse Research Institute in 2016 compared the performance of over 3000 companies across the world and found that those with higher levels of female participation in senior management performed better over the past decade.
Greater diversity can also create a virtuous circle – a company with a diverse board and workforce will likely attract more diverse talent, in our own view, thereby increasing its brand and reputation. As more employees look at the culture of an organisation they consider joining, a reputation for strong diversity can be a benefit for attracting the top talent.
Delivering through diversity
Increasing diversity is one of the most important issues on which we engage with companies. Expanding the available pool of talent can enhance business decision making and has the potential to improve performance, in our view. This is why Legal & General is actively constructing products such as the L&G Future World Gender in Leadership UK Index Fund to help investors capitalise on this opportunity. The Hampton-Alexander review estimates that for companies to meet the 33% by 2020 target, women need to be recruited in two out of every five appointments. It is an ambitious target but one we are committed to helping companies achieve.
Find out more about Legal & General's commitment to gender diversity.
Please note the information, data and any references in this article were accurate at the time of writing. Please check the date of the content if you’re looking for up to date investment commentary or tax-year related information.
*Source: Innosight, Corporate Longevity Briefing (2018)
**Credit Suisse Research Institute: The CS Gender 3000: The Reward for Change (2016), INVolve: The Value of Diversity (2018), McKinsey & Company: Women in the Workplace 2016