Investing in Equality

Although it’s 2017, women the world over still face extreme adversity in the workplace. But how can gender equality actually help a company’s bottom line?

This day two weeks ago, millions of people across the world united in celebrating International Women’s Day. But who could ever have predicted that Wall Street would become an unofficial focal point of the movement?

The overnight unveiling of the ‘Fearless Girl’ statue fired the hearts of equality advocates across the globe. Standing defiantly in front of the ‘Charging Bull’ of Wall Street, the guerilla installation by State Street Global Advisors struck a chord with many – serving as a poignant reminder of the difficult environment women face in the corporate world.

The irony wasn’t lost on critics though, as Wall Street companies still remain some of the toughest places for women to rise through the ranks.

Of course, some will argue that there have been fundamental improvements in the way women are treated in the workplace. Some will even posit that, far from occupying traditional roles they did in the past, there has been a marked increase in female participation in most modern workplaces.

But the truth of the matter is still blindingly obvious. Women still tend to get a raw deal in business, particularly in the higher echelons of the corporate world.

Challenges

Most people are somewhat aware of the countless difficulties and discriminations females across all industries face. But a recent study by the Peterson Institute for International Economics highlights the disparity with some sobering statistics.

After analyzing over 21,980 public companies across 91 countries, this massive case study showed that about 60% of the companies surveyed had no female members on their board of directors, while less than 5% had a female CEO.

Difficulty in climbing up the corporate ladder isn’t the only challenge women in the workplace face though. According to the UN Women’s flagship report in 2015, women worldwide are paid 25% less on average than men for doing the same job.

This is a long-standing and multi-faceted problem. But far from the more important concerns of social justice and equality, profound workplace inequality between the sexes also doesn’t make simple business sense either.

In fact, it’s actually been proven that companies who have more females in top-level positions perform substantially better in the long run.

Who Run The World?

A few years back, Boston-based trading platform Quantopian decided to do a little experiment. Using a simulation of the US market between 2002 and 2014, the company pitted the performance of the S&P500 against some companies that have female CEOs.

The study invested a hypothetical $100,000 into all of the Fortune 1000 companies that had a woman at the helm, and then another $100,000 into the S&P500 index. These investments would track their performance over the same period of time.

And the results?

While the S&P500 investments grew an admirable 122% over the fourteen year period, the female-led companies yielded a much-more impressive return of 348%.

That means that, had you invested your money in the 80 companies headed up by women over that particular time-frame, your initial investment of $100,000 would have grown to $448,158.

It’s just a pity the money was hypothetical.

Of course, this isn’t to say that female leadership instantly equates to runaway success. But an average outperformance of that magnitude proves that female leadership is more than capable of managing some of the world’s biggest companies.

The Peterson Institute not only found that there were profound inequalities in the female membership of the higher boards of companies, but they also established that those companies who did have strong female leadership again performed better.

The research demonstrated that “the presence of more female leaders in top positions of corporate management correlates with increased profitability of these companies.” In fact, it’s suggested that having at least 30% of women in ‘C-Suite’ leadership positions (CEO, CFO, COO) adds about 6% on average to a company’s profit margin.

A different ‘Women on Boards’ study carried out by MCSI were even more assured in their findings, estimating that strong female leadership would generate a Return on Equity of 10.1% per year.

What is most important to note is that these findings are not advocating female domination of the working world however. They’re based on parity and equality.

If the roles were reversed overnight, global industries run predominantly by women won’t necessarily perform better than those run by men. Rather, it’s companies that are run by a fair and balanced division of gender that seem to prosper.

Investing in Equality

It might sound slightly insensitive to focus solely on the economic benefits a more diverse workforce can bring, but the research doesn’t lie.

The bottom line is the most important consideration for any company. So if the captains of industry can spot an opportunity to increase their profits through inclusivity, more effort will be channeled into gender diversity in management positions.

Warren Buffett has always been a firm believer in the economic power of women in the workplace. In fact, he sees the experiences women can bring to the business table as an untapped resource, stating that: “we’ve seen what can be accomplished when we use 50% of our human capacity. If you visualize what 100% can do, you’ll join me as an unbridled optimist about America’s future.”

The true power of gender equality in the workforce lies in the diversity of opinions and approaches that can be brought to the table. Inclusivity can only ever expand a company’s overall scope, not limit it.

This is partly the reason why we’re so bullish about the long-term health of the market here at Rubicoin. Yes, there’s still a lot of ground to cover in terms of offering equal opportunities to all. But the only way we can move is forward.

As long as more women continue to fill more high-level management positions, companies will continue to innovate and grow. And just as the Fearless Girl statue looks likely to become a permanent feature of Wall Street, female leadership will continue to become more established and drive progressive companies forward.

 

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