Follow the Female Leaders to Faster Portfolio Growth
byMar 1st 2012 2:40PM
The million-dollar question executives ask themselves daily is this: "What can I do to give my company an edge over competitors?" Studies show that the answer may be as simple as hiring more women for executive and board of director roles.
A 2007 McKinsey study showed that among European companies, those with the most gender diversity at the executive level reported, on average, 48% higher earnings before interest and taxes than others in their industries. More importantly for investors, those companies' stock prices beat the market by 17%. Correlation, of course, does not equal causation, but those numbers are hard to ignore.
lululemon athletica (LULU) is one extreme example of a woman-run business smashing through the glass ceiling: Christine Day has been dominating as the company's CEO, and the stock is up more than 750% since 2008.
So what is it that Day and other female executives have that their male counterparts don't? To start with, they're bringing a type of temperament and mind-set that the executive world has been lacking.
A Woman's Touch
Studies show that women tend to be a bit more humble, level-headed, and risk averse than men, and those qualities can provide fresh (and important) new insights to a group that's been marching in testosterone-driven lockstep for so long.
To drive the point home, check out how a few well-known companies with women at the top have performed over the past few years. Note how every single one of these companies has consistently beaten the market's performance during the same period of time:
Obviously, many factors influence a company's performance, and having a diverse management team doesn't guarantee market-beating results. But each of the companies above is touted as being an innovative brand with happy customers, and gender diversity may be the key to their success.
- Buffalo Wild Wings (BWLD) is led by CEO Sally Smith, along with an executive team of five other women and four men. The popular sports bar has consistently beaten the market since its IPO in 2003.
- TJX Companies' (TJX) Carol Meyrowitz became the company's CEO in 2007, and the stock price is up more than 150% since then.
- Irene Rosenfeld became CEO of Kraft Foods (KFT) in 2006. The company's stock is currently up more than 20% from its prerecession price, which means that while they took a hit with the economy, Rosenfeld and her team kept a level head and positioned themselves well for recovery.
- While their CEOs are not female, Starbucks (SBUX) and Amazon.com (AMZN) -- two companies that have done extremely well over the past few years -- have great diversity within their executive teams and boards.
A Long Way to Go
As female consumers continue to gain influence in purchasing decisions, even with products not directly targeted toward them, it makes sense to have more gender-diverse management teams. Even though the companies above have made concerted and successful efforts to diversify, we're still a ways off from where we should be.
Of the 110 key executive and board positions listed on Morningstar for the six companies named above, only 33 are women. That's a mere 30% among some of the most gender-diverse management teams out there. It doesn't make much sense, since women now obtain more than half of college and graduate level degrees.
What's even worse is that there are still companies with zero women on their boards and management teams. To check on the gender diversity of the companies in your portfolio, make sure to look through the proxy statements that come out each year. There's no excuse for any company to be missing out on such a common-sense edge.
Motley Fool contributor Amanda Buchanan holds no position in any company mentioned. The Motley Fool owns shares of Amazon.com, lululemon athletica, Buffalo Wild Wings, and Starbucks. Motley Fool newsletter services have recommended buying shares of lululemon athletica, Starbucks, Buffalo Wild Wings, and Amazon.com, as well as writing covered calls in Starbucks and Buffalo Wild Wings.