Hiring Women in Business

Current Federal-Reserve Vice Chairman Janet Yellen is said to be the next pretender to the Federal-Reserve throne after Ben Bernanke jumps into his helicopter and takes a short ride somewhere to some secluded spot in January 2014 (doubtful, however, whether he will throw the cash out this time at all to the poor people that are down below looking up at him).

Women: Janet Yellen

Women: Janet Yellen

Although Yellen is probably the person that is most likely to follow on after Bernanke and get nominated by President Barack Obama, it now looks as if, according to recent research, she may indeed be the woman for the job.

Apparently, having a woman on the executive board increases the chances of having improved returns on shareholder investment. PA Consulting Group carried out some research which has just been published linking women on executive boards and the rate of return for shareholders in 50 companies in the USA and the UK.

The results show that women improve performance when they hold executive positions. Sometimes it can be up to a 600%-increase in Total Share Returns (TSR) for a company. Where women are lacking on the board of executives and hold no such senior positions there is only a maximum increase of 100% of TSR. So, are we being told that the situation could have been much worse had Yellen not been Vice Chairman of the Federal Reserve? It doesn’t warrant thinking about! If the situation, which is far from perfect, were 600 times worse, then wonder where we would all be right now!

Although, some opponents of Yellen might already argue that she held a senior executive position and that the returns provided by that on the US economy have been limited in recent months, despite a slight improvement in the situation.

Apparently, according to statistics, 15% of US companies listed on the FTSE All-World Index Series (which is the aggregate of 2, 800 stocks from the FTSE Global Equity Index Series, covering around 95% of market capitalization that can be invested in) do not have any women at all at such high echelons of their companies. The UK fares much better with 46%. For years we have spoken of equality, diversity and gender-related management skills. But, the glass-ceiling still exists and companies in the western world have nowhere near as good a figure as those in the Asian-Pacific region (where the percentage stands at 73%). Furthermore, we are nowhere near parity anywhere in the world regarding executive positions.

Men and Women Executives

Men and Women Executives

But, maybe it looks like there is some improvement that might be underway in the US, at least. Last year alone, half of all appointments were being given to women on boards of directors.

PA Consulting Group’s research corroborates the study that was carried out also last year by Credit Suisse, after they looked at 2, 500 companies. Their results showed that companies that had at least one women sitting on the board of directors had made for a 26%-increase in profits (from 2005 until 2012). According to the research, the attitude and behavior of men changes when there is a woman around. They seem to become more empathic and closer to the consumer. Companies with women on their boards grew by 4% more than companies with no women between 2005 and 2012. Is that why we printed more money at the Federal Reserve? The money supply just had to grow!

A European Commission study carried out in 2010 also showed that companies that had diversity programs, employing women in top-managerial positions, improved productivity by 58%. The figure of 62% was suggested as to the possibility of retaining talented workers if women were in positions of authority.

But, the number of women on boards is increasing by an average of just 0.5% per year today. That means that it would take five decades approximately for there to be parity between men and women. 27% of Fortune 500 companies employ no women on their boards at the present time.

Women: Executive Parity

Women: Executive Parity

So, will Ms. Yellen improve the fate of the US economy? Or has the best been done so far? One thing is for sure. Up until now, companies have been employing women because e they have been told to do so by the state in a bid to close parity gaps. Perhaps, in the not too distant future, that obligation will change into being backed by a wish because the companies have realized that omen do indeed have something to offer the world of business and can make a difference sitting on executive boards.

About The Author

tothetick

Professional team of writers/analysts analyzing the financial markets.

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