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Women Boost the Bottom Line

If you're looking for companies in which to invest that stand a good chance of performing well financially in the coming years, you might want to look for one with a lot of women in upper management.

A recent study (.pdf file) by the research organization Catalyst (which promotes the advancement of women in business) suggests that more women in upper management can boost a company's bottom line.

This is good news for those who argue that diversity in a company is a good thing, helping make it more competitive. But back to the study. It was sponsored by BMO Financial Group, and examined financial performance in terms of return on equity (ROE) and total return to shareholders (TRS). Some 353 companies were examined -- those that were on the Fortune 500 list for four out of five years between 1996 and 2000.

Key findings were:

  • "The group of companies with the highest representation of women on their senior management teams had a 35% higher ROE and a 34% higher TRS than companies with the lowest women's representation."

  • "Consumer Discretionary, Consumer Staples, and Financial Services companies with the highest representation of women in senior management experienced a considerably higher ROE and TRS than companies with the lowest representation of women."

Catalyst President Ilene H. Lang happily noted that "business leaders increasingly request hard data to support the link between gender diversity and corporate performance. This study gives business leaders unquestionable evidence that a link does exist.... We controlled for industry and company differences and the conclusion was still the same. Top-performing companies have a higher representation of women on their leadership teams."

As an example of a firm with solid female representation at the top, consider Home Depot (NYSE: HD  ) . A recent article in the Atlanta Journal-Constitution profiles CFO Carol Tome, Controller Kelly Barrett, Treasurer Rebecca Flick, and Investor Relations chief Diane Dayhoff. Meanwhile, PepsiCo (NYSE: PEP  ) has Indra Nooyi as president and CFO, Paula Banks as senior vice president of global diversity/inclusion and organizational partnerships, and Margaret Moore as senior vice president of human resources. You'll also see some women in senior management at Wal-Mart (NYSE: WMT  ) , Hewlett-Packard (NYSE: HPQ  ) , and Citigroup (NYSE: C  ) , among others.

So, a lot of women have clearly come a long way. Still, we're not yet seeing many companies where roughly half their top managers are women. Whenever that happens, it will be interesting to see if the firms' bottom lines fatten any.

Meanwhile, for some serious stock investment ideas, check out our suite of stock newsletters, which deliver promising recommendations each month.

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