Get women on board your board and boost your shares

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

PUBLISHED : Tuesday, 16 July, 2013, 12:00am
UPDATED : Tuesday, 16 July, 2013, 5:27am

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.