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Companies with women executives outperform peers, study says Knight Ridder News Service

Companies that promote women to top jobs don’t just serve women or a corporate image: They give investors a better run for their money, according to a new report.

http://www.magicvalley.com/news/business/index.asp?StoryID=4269

On average, companies with a higher percentage of women in top jobs posted a 35 percent higher return on equity and a 34 percent greater return to shareholders than firms with fewer female executives, according to the study by Catalyst, a nonprofit research firm seeking to advance women in business.

"On average, companies with the highest percentage of women in top management financially outperform companies with the lowest percentage," said Ilene Lang, president of Catalyst.

The report analyzes 353 Fortune 500 companies’ financial performance from 1996 to 2000. The most gender-diverse companies filled about 20 percent of their top jobs with women, while the least diverse had an average of 2 percent of those posts held by women.

This is not a study about cause and effect, Lang said. That is, the study didn’t find that companies perform well because more women are in top jobs, but that there’s a connection between gender diversity and financial performance, and it’s statistically significant.

"There is a correlation. It’s not random," she said.

For some, that correlation came as a surprise. "I expected to find no statistical significance," said Harvey Wagner, a business professor at Kenan-Flagler School of Business at the University of North Carolina, Chapel Hill, and an adviser on the study.

"In studies involving TRS (total return to shareholders), which is mostly influenced by the volatility of stock prices, it’s hard to find anything" of statistical significance, he said. "If you can find something, you can make a lot of money," he said, with a laugh.

But he wasn’t entirely joking. Imagine a mutual fund with shares of 90 of the most gender-diverse companies. Investors of that fund would earn 34 percent more than investors holding the 90 companies with the lowest percentage of female executives.

That wouldn’t apply for any one company. "Within each of these groups, there’s a lot of variation," Wagner said.

And a lot would depend on the time period. For instance, Enron is among the companies studied with the highest percentage of women in top jobs.

It’s crucial to not assume that the percentage of women in top management alone influences the bottom line. "I don’t think that any single best practice occurs in isolation," said Judy Olian, dean of Penn State University’s Smeal College of Business. "It’s usually a pattern of best practices. That’s what I think we’re seeing here."

The study’s authors agree. "A company that manages diversity well all the way through its top management probably manages many things well. It’s a sign of good management of talent and a hallmark of success," Lang said.

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