Women In The Boardroom Is A Big Deal For Investors

Lisa Smith, BA (Hons), CeFA

The gender diversity of senior management is becoming an important topic for investors, according to new research.

Hermes Investment Management, a fund manager with £26 billion under investment has revealed more than half of 100 institutional investors now scrutinise diversity in the boardroom before staking cash in a company.

The increasing importance of adding women to the management team shows as last year, only one in four investors had the same concerns.

The firm also discovered that only a minority of investors considered management gender diversity unimportant (2%).

Harriet Steel, head of business development at Hermes Investment Management, said: “To see the number on investors who place importance of gender diversity leap up by more than double is extremely encouraging and reflective of the high profile campaigns and initiatives introduced to increase gender parity.

Gender at work comes under scrutiny

“In our research we believe that the issue for investors appears to be risk, rather than high returns. Investors are growing increasingly aware of the link between ‘group think’ and poor corporate practice.

“Boards with more diverse composition tend to challenge senior management, be more innovative and make better decisions. These are febrile times and investors increasingly recognise that certain sorts of risk can fundamentally undermine the performance of their portfolios over time. Worse still, they may be accused of failing in their fiduciary duty.”

The fund’s Responsible Capitalism survey also showed that all gender was an important factor for investors, other forms of diversity were not scrutinised so much.

Investors must take note of policymakers

Although half of investors liked to see women in senior management, only 30% were concerned about race, around the same number worried about the education of managers and 19% about their socio-economic background.

“In the Europe Union, 19 states mandate that employee representatives sit on corporate boards, while US presidential candidate Hillary Clinton has promised corporate governance reform. When diversity considerations draw the attention of policymakers, companies and investors must increasingly take note,” said Steel.

“In the UK, Prime Minister Theresa May has immediately took aim at non-executive board members ‘drawn from the same narrow social and professional circles as the executive team’, accusing them of providing insufficient scrutiny.”

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