Research by Dharmendra Naidu and Dr Kumari Ranjeeni [READ A SUMMARY HERE] reveals a strong correlation between gender diversity in boardrooms and higher long-term shareholder returns. The study, analyzing US-listed companies from 1998 to 2016, found that gender-diverse boards handle sensitive information differently than all-male boards.
While all-male boards tend to release information for short-term gain, mixed-gender boards take a more strategic approach, prioritizing the safeguarding of proprietary information. This is attributed to women being more ethical and risk-averse, leading to careful guarding of sensitive information. This strategy protects the firm’s competitive edge, leading to a net gain of about 10% in stock price over three years.
However, withholding certain details in public disclosures could lead to higher short-term costs. Despite this, the researchers hope their findings will convince firms of the significant benefits of female directors. By prioritizing confidentiality, gender-diverse boards foster loyalty, a key element of sustainable success.
The research supports the implementation of board gender quotas and has implications for regulators, firms, and shareholders, particularly in fostering the ethical redaction of proprietary information. The researchers are also exploring ways to combat gender stereotypes and raise awareness about the critical role women play in boardrooms. Their upcoming publication shows how investors undervalue firms with female directors due to gender role stereotypes, arguing that increased societal awareness can help dismantle these harmful stereotypes. The conclusion is clear: female directors matter.