Gender Diversity Is Good for the Bottom Line

Last Updated Oct 2, 2007 12:44 PM EDT

Gender Diversity Is Good For the Bottom LineIn February, the research firm Catalyst reported that after years of gains the number of women serving on boards of directors had actually declined. While that's certainly bad for diversity and raises a good number of questions as to why the trend has reversed, Catalyst has also found it is bad for the bottom line.

The new research out yesterday found that the more women on the board of a Fortune 500 company, the greater its financial performance. The study examined three financial measures: return on equity, return on sales, and return on invested capital. Ilene H. Lang, President of Catalyst, commented on the results:

"This Catalyst study again demonstrates the very strong correlation between corporate financial performance and gender diversity. We know that diversity, well managed, produces better results. And smart companies appreciate that diversifying their boards with women can lead to more independence, innovation, and good governance and maximize their company's performance."
So why did the number of women serving on corporate boards decline in 2006 for the first time in nine years? Forbes released a thoughtful story exploring the issue when the numbers were released.

Also of interest is a recent study from the Wellesley Centers for Women that found "a critical mass of three or more women serving on a corporate board can cause a fundamental change in the boardroom and enhance corporate governance." The conclusion: one woman does not diversity make. In order for women's voices to be heard and the benefits of their unique perspective realized, we need more, not less, women on corporate boards.

(Image of board room by dlisbona, CC 2.0)

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    Jessica lives in London where she works as a freelance writer with interests in green business and tech, management, and marketing.