Board Diversity Pays Off

Want to find the best-performing companies? Look for boards with an extra shot of diversity. That's the key finding from a new report by the California Public Employees' Retirement System, which suggests that diverse boards of directors lead to higher returns on equity, returns on sales, and returns on invested capital.

By "diversity," the report means that board members should span a healthy representation of genders, ethnicities, and areas of business expertise. That's no surprise, when you stop to think about it. After all, wouldn't you rather have a multitalented array of directors from different backgrounds, with experience in all areas of the business world, rather than an identical cadre of pasty-faced accountants?

Turn diversity into dollars
These days, it's easy to discover the makeup of a company's board just by taking a gander at their Web site. A quick Google search on each member of the board should provide you with additional insight into their background and experience.

If you're not sure where to start that research, look for reports that highlight companies embracing diversity. Catalyst, an organization that monitors the growing presence of women at the top of corporations, recognizes stand-out organizations each year, including this crop of recent candidates:

  • Baxter International (NYSE: BAX  )
  • ING (NYSE: ING  )
  • Nissan (Nasdaq: NSANY  )
  • Goldman Sachs (NYSE: GS  )
  • BP (NYSE: BP  )
  • Chubb
  • Safeway (NYSE: SWY  )

It might also pay to keep an eye on the qualities and qualifications of newly elected board members. Apple, for example, just added Avon Products (NYSE: AVP  ) CEO Andrea Jung as a director. Will she add a dose of Avon's expertise at successful sales through non-standard channels to Apple's record of retail and product innovation? If nothing else, at least she's not just another cookie-cutter number-cruncher.

Prepare to board further Foolishness:

Longtime Fool contributor Selena Maranjian owns shares of Costco and Apple. Nissan is a Motley Fool Global Gains recommendation. Costco is a Motley Fool Inside Value selection. Costco and Apple are Motley Fool Stock Advisor recommendations. Try our investing newsletters free for 30 days. The Motley Fool is Fools writing for Fools.


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