The Bottom Line: Corporate Performance and Women's Representation on Boards
Women Board Directors (WBD) Align With Strong Performance at Fortune 500 Companies1**
Financial measures excel where women serve2
Notes:
1 Based upon the four-year average for ROE, ROS, and ROIC for 2001, 2002, 2003, and 2004, and women board director (WBD) data for 2001 and 2003. Financial data for the companies examined were obtained from the Standard & Poor’s Compustat database. Because of movement into and out of the Fortune 500 each year, there are 520 companies in this analysis; the top quartile comprises the 132 companies with the highest average percentage of women board directors while the bottom quartile comprises the 129 companies with the lowest average percentage of women board directors. WBD data was obtained from the 2003 Catalyst Census of Women Board Directors and the 2001 Catalyst Census of Women Board Directors. Financial performance measures vary by industry. To account for this variability, standardized financial performance measures were used to make comparisons within the overall sample.
2 Correlation does not prove or imply causation.
3 Return on equity (ROE): ratio of after-tax net profit to stockholders’ equity.
4 Return on sales (ROS): pre-tax net profit divided by revenue.
5 Return on invested capital (ROIC): ratio of after-tax net operating profit to invested capital.
6 Standard & Poor’s industry sectors were used. To increase the sample size, we combined the following industry sectors as follows: Consumer Discretionary (Goods, Services); Consumer Staples (Goods, Services); Healthcare (Others, Pharmaceuticals); Industrials (Goods, Services); and Information Technology (Hardware, Software). Three industry sectors (Utilities, Energy, and Telecommunications) were excluded because each has fewer than six companies in the top and/or bottom quartiles, precluding meaningful analysis.
*Dr. Wagner is Professor, Kenan-Flager Business School, University of North Carolina, Chapel Hill; Dr. Narayanan is Assistant Professor, Eli Broad School of Business, Michigan State University, East Lansing.
1 Based upon the four-year average for ROE, ROS, and ROIC for 2001, 2002, 2003, and 2004, and women board director (WBD) data for 2001 and 2003. Financial data for the companies examined were obtained from the Standard & Poor’s Compustat database. Because of movement into and out of the Fortune 500 each year, there are 520 companies in this analysis; the top quartile comprises the 132 companies with the highest average percentage of women board directors while the bottom quartile comprises the 129 companies with the lowest average percentage of women board directors. WBD data was obtained from the 2003 Catalyst Census of Women Board Directors and the 2001 Catalyst Census of Women Board Directors. Financial performance measures vary by industry. To account for this variability, standardized financial performance measures were used to make comparisons within the overall sample.
2 Correlation does not prove or imply causation.
3 Return on equity (ROE): ratio of after-tax net profit to stockholders’ equity.
4 Return on sales (ROS): pre-tax net profit divided by revenue.
5 Return on invested capital (ROIC): ratio of after-tax net operating profit to invested capital.
6 Standard & Poor’s industry sectors were used. To increase the sample size, we combined the following industry sectors as follows: Consumer Discretionary (Goods, Services); Consumer Staples (Goods, Services); Healthcare (Others, Pharmaceuticals); Industrials (Goods, Services); and Information Technology (Hardware, Software). Three industry sectors (Utilities, Energy, and Telecommunications) were excluded because each has fewer than six companies in the top and/or bottom quartiles, precluding meaningful analysis.
*Dr. Wagner is Professor, Kenan-Flager Business School, University of North Carolina, Chapel Hill; Dr. Narayanan is Assistant Professor, Eli Broad School of Business, Michigan State University, East Lansing.
**This report is the second in Catalyst's Business Case series.
