More women – better financial performance

Increasing the number of women on boards of directors is good for business. Dr Stuart Locke, Director of the University of Waikato’s Institute for Business Research, says they analysed 10 years of data from NZX companies and found increasing the number of women on the board increased financial performance.

The New Zealand Stock Exchange is proposing new rules that will require all publicly listed companies to declare the composition of their boards – stating how many women and minorities they have as directors and in senior roles.

The average percentage of women on NZX top 100 boards is 9.3% while for public sector boards, it’s 41%. “In global terms New Zealand does not rank well based on NZX figures, which is surprising given the number of women university graduates,” says Dr Locke. “Most companies seem to ignore the talent available and their shareholders pay the price.”

The Australia Stock Exchange has changed its rules and that’s led to a 50% jump in female representation on boards in less than two years. The Australian policy recommends publicly listed companies have a gender diversity policy. The New Zealand proposal calls for it to be mandatory and goes beyond gender diversity to include ethnic diversity.

However, Dr Locke also points out that just because women are associated positively with financial performance in New Zealand, it’s not the case in all economies.

“It’s certainly not a given. Take Sri Lanka for example; female directors are often spouses of the business owner and only there so the business can distribute income at a lower marginal tax rate – they’re not expected to know anything about the business and even the courts recognise their lack of input and do not hold them accountable for any decision making.”