• Fri
  • Aug 29, 2014
  • Updated: 4:25pm
Column
PUBLISHED : Tuesday, 16 July, 2013, 12:00am
UPDATED : Tuesday, 16 July, 2013, 5:27am

Get women on board your board and boost your shares

Figures show that HK firms with at least one female board member perform better

BIO

Enoch Yiu is the chief reporter of business pages at the Post. She writes feature stories with a focus on regulatory issues, stock exchanges, the Securities and Futures Commission, accountancy, insurance, pension and other financial industry development issuse. She has a weekly column, White Collar, covering the latest issues in the professional industry and also hosts podcasts and video programs on SCMP.com. She is the author of two books.
 

Hong Kong investors now have good reason to check on the number of women on the boards of listed companies.

With Hong Kong Exchanges and Clearing introducing a rule to encourage more women on boards, a Thomson Reuters study has shown that women directors can have a positive impact on the share prices of companies.

The report tracked more than 4,100 companies globally including Hong Kong and mainland firms, and showed companies with at least one women on board performed better in terms of their share prices than those without any women directors in the past 18 months.

The study found that US$100 invested on January 1 2012 in each of 57 Hong Kong firms, the shares of the 34 companies that had at least one woman on the board would have risen in value to US$128 as the June 30 this year, against a rise in value to US$115 for the 23 companies that had no female directors.

The gap was pretty consistent over the whole 18-month period, with those Hong Kong-listed firms having a women on their board outperforming the companies without any female director by between US$5 and US$10.

Andre Chanavat, Thomson Reuters' environmental, social and governance product manager, who conducted the study, said this showed regulators have good reasons to seek ways to encourage more women on boards.

"Hong Kong is not alone in taking this stance, as a small but growing number of other countries and stock exchanges have realised that it can also can make good business sense, and not just tick a diversity box," Chanavat said.

From September, HKEx will require the more than 1,500 companies listed in Hong Kong to introduce policies to ensure the make-up of their boards is better balanced - or explain why they have not complied.

But why do female directors have an impact on shares prices? The report did not give any answers, but from many female directors' points of view, companies that accepted a more balanced composition of board directors better understood different customers' needs.

Housewives are the ones to determine what brand to buy in the supermarket, while many clothing or household products are also purchased by women. Having a woman on the board of retail or other consumer-focused companies helps improve understanding of what products or promotional programmes are more appealing to women.

The report also showed globally that companies in technology, industrial and non-cyclical consumer goods and services companies have more women on their boards. Only about 9 per cent of directors of listed companies in Hong Kong are women, lagging behind overseas markets: 17 per cent of board members in Britain are women, and about 40 per cent in Norway, where it is a legal requirement that companies have that ratio of female directors.

While overseas firms generally have a better representation of women on their boards than companies in Hong Kong, female directors are still in the minority in the board room globally. Last year, 59 per cent of the 4,100 global companies had at least one woman on their boards but only 17 per cent had more than 20 per cent of board members who were women.

Let us wait and see whether Hong Kong will make any improvement after September.

Share

For unlimited access to:

SCMP.com SCMP Tablet Edition SCMP Mobile Edition 10-year news archive
 
 

 

2

This article is now closed to comments

impala
Unless the report adjusted the two stock baskets (all-male board vs mixed-gender board) for their respective market beta, the result is statistically completely meaningless, especially given the small data set for Hong Kong. Hang on, let me rephrase that: it is utterly worthless.

And even if the performance difference persists on a risk-adjusted basis (let's assume so), then the causal explanation for such correlation is more likely to be distal rather than proximate. That could be for example: having female board members is just one facet of better corporate governance overall, and it is this corporate governance advantage that generates better shareholder returns. Or perhaps the causation is reversed: better performing companies have a better pick of board members, including women. And since (sadly enough) the female pool of suitable board members in Hong Kong remains much smaller than the male pool, the effect of only the better companies choosing women on their board would not be completely surprising.

Either way, out of a hundred possible causal relationships that could lie behind this observation, "putting women on your board will improve your share price performance" is really not one you can remotely justify with this piece of research.
XYZ
This is nonsense, of course. Did anyone check to see that Apple's board has not a single woman on it before buying its products? I doubt it. They seem to be doing fine as a company. I'll be more willing to believe the meme of "female board members raise share price" when there are similar studies documenting whether people of below-average height or left-handed people or vegetarians on the board add value as well.
 
 
 
 
 

Login

SCMP.com Account

or