Having more women in the boardroom could damage the financial performance of well-governed companies, according to research in the Journal of Financial Economics. According to the Financial Times, the research into the effect of female directors found on average, companies with proportionally more women on their boards were less profitable and had a lower market value. The report said businesses are under pressure to recruit more females and people from ethnic minorities to their boards, “to break the stranglehold of middle-class white men.” Daniel Ferreira , from the London School of Economics and Political Science, and Renee Adams from the University of Queensland, the report’s authors, said their research showed how “meddling” with boards could produce unexpected results. However, their study, which was based on a survey of nearly 87,000 directorships at 2,000 US companies between 1996 and 2003, concluded that boards with more women were more effective at tasks such as executive supervision and monitoring. Yet while those traits often helped badly governed companies, the Ferreira and Adams study suggests that increased monitoring can have a negative effect on well-governed businesses.
Could a Higher Proportion of Female Directors Harm Profits?
Study concluded that boards with more women were more effective at tasks such as executive supervision and monitoring.
August 7, 2009