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The under-representation of women at senior levels in companies continues to divide opinion, with Angela Merkel, the German chancellor, facing a revolt by women parliamentarians over statutory quotas for women on boards and Viviane Reding, EU commissioner for justice, forced to adapt her proposed quota plan to sanctions.
But a study by Michel Ferrary, professor of human resource management at Skema Business School in France, suggests companies with at least 35 per cent women on the management team perform better during financial crises.
Analysing the stock performance of each company in the CAC40, the Parisian stock index, he composed the Femina Index, a separate index of 10 companies whose management teams consisted of 35 per cent women. These included Danone, L’Oréal, LVMH and Société Générale.
The professor then compared both indexes for six years, from 2007 to 2012, and found the CAC40 lost 34.70 per cent of its value, whereas companies in the Femina Index, lost only 5.28 per cent.
“This shows that if you design an investment strategy based on gender diversity, you will beat the market,” says Prof Ferrary.
One reason for this, according to the professor, is that diversity leads to a better understanding of the market. For example, female engineers at Renault were asked to design a car and consequently came up with one that could be driven with a flat tyre. “A man would never have thought of this,” he says, “as they believe [a man] should know how to change a tyre.”
Another reason is that gender diversity creates better decision-making processes with more balanced risk-taking. At BNP Paribas, for example, one of the 10 companies in the Femina Index, 44 per cent of the management is female and it is considered one of the best banks in France, he says. Meanwhile, Dexia, the only French bank to go bankrupt, has only 18 per cent of women in management.
However, the professor also points out that one negative reason for this outcome is salary differences. “Women are paid less than men [which] saves money and increases the profitability of a company,” he explains.
The results contrast significantly with a paper published by Germany’s central bank this month that challenges the popular idea that the global financial system would be intrinsically safer if run by women. But Prof Ferrary believes his research approaches the issue from a different angle, by correlating the stock performances of companies with the number of women on the whole management team of a company as opposed to just their board.
“The 35 per cent threshold I have used makes a difference,” he says, explaining that a minority of less than this has little influence on company performance.