CCATP #603 – Laura Kane on Effect of Women on Business Success

This week our guest is Laura Kane, CFA, CPA, Head of Investment Themes Americas for UBS.  Laura specializes in something called Sustainable Investing for UBS. As part of her research she has written several articles about investing through a gender lens. I’ve asked Laura to come on, not to talk about investing per se, but rather what she has discovered about the impact women have on the success of a company.

Here’s a link to the research we discuss in the interview: ubs.com/…

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• What lead you to study investing with a gender lens?
• Is the logic of investing in companies with better gender equality only about investing in alignment with your values and hoping to have a positive social impact?
• Is the percentage of women in the workplace pretty much static? 
  • 47% in 2015 vs 38% in 1970
 * Mothers are primary earner for 40% of households with children under 18
• How about education levels of women vs men? 
 * 20% more women than men with at least a bachelor’s degree, ½ of students in JD, MBA & MD programs up from 10% in the 1960s
 * 34 vs 26% chance of a woman having a degree before age 29 vs men
• Do these percentages stay true as you go up into key leadership positions? 
 * 19% of S&P 500 board of directors’ seats & 25% of exec management positions are women & 5% of S&P 500 companies have female CEOs
• The big question – do companies that more successfully incorporate women into their organizations offer better returns to shareholders than those that fail to do so?
• Shouldn’t companies simply promote the “best” person for the job?
 * Social psychology finds diverse groups make better decisions, less “group think” than homogeneous groups
 * Different skills of women
• How is the collective intelligence of a group dependent on the gender diversity of that group?
  • Is it just behaviorally or is there more to it than that?
  • Social sensitivity and informational diversity
• Are there downsides to gender diversity in a group
  • Higher levels of value diversity “differences among participants’ ideas of what the group’s real task, goal, or mission should be” was positively and significantly related to increased conflict within the group, especially with value diversity

• When it comes to filling Board seats of corporations with women, isn’t that difficult since so few women are already CEOs and that’s where board members are usually selected?
• Is there any research that identifies different expertise fields of knowledge of women vs. men?
• What about leadership skills? Are there any skills that women possess that leads to better organizational success?
• How do boards function differently when they have female directors?
  • More meetings, fewer absences (of both genders), decision making, remove CEO for underperformance, more diligent monitoring, fewer cases of bribery, corruption and fraud, fewer lawsuits related to product liability
• Is having one woman on a board effective at making these improvements?
  • Once a board includes at least three women directors, the women directors no longer represent the “woman’s point of view”, and directors notice the women directors’ opinions rather than their gender.
• Do we know that there’s a causal relationship between having women on a board and all of these benefits? How do we know it’s not just that women gravitate towards better-run companies?
  • Helena Morrissey: One thing that people tend to bring up is that you can’t prove causality. In my opinion, it does not really matter €“ if women are choosing to serve on the boards of higher quality companies, that should be a good indicator for investors as well.
  • Megan Smith CTO of the US: For profitable firms, a move from no female leaders to 30% representation is associated with a 15 percent increase in the net revenue.
  • Megan Smith “Isolating women as the cause of outperformance is a difficult task that involves disentangling the “female factor” from a host of other variables that may lead to financial outperformance. Studies that attempted to correct for this problem have yielded inconclusive results. What we can state with some degree of confidence is that greater female representation in corporate leadership is associated with higher profitability.