Banks and other financial institutions conduct studies for the purpose of better understanding various phenomena on a regular basis. As a result, it is perhaps unsurprising that Bank of America Merrill Lynch has looked into the impact of companies hiring more women for their top positions, which has turned up some rather interesting results. In particular, it seems that hiring more women for top positions leads to more stock value as well as a host of other upsides.
In short, Bank of America Merrill Lynch conducted a study comparing companies with high scores for environmental, social, and corporate governance (ESG) with companies with low scores for the same, which produced a number of interesting findings. For example, it revealed that companies with higher scores have higher returns on shareholders’ equity, which tends to be seen as an indicator of the efficacy and efficiency of an executive team’s profit-making. Likewise, it turned out that companies with higher scores have less earnings risk than their lower-scoring counterparts, which is important because earnings risk can be considered the volatility of a business’s profit per share.
With that said, the finding that is most relevant for this topic is that companies that had women for at least 20 percent of their top positions were stronger performers than their more male-dominated counterparts based on a number of metrics, which included higher premiums for their stock shares. As a result, this makes it clear that the ethical course of action is the pragmatic course of action as well. On the whole, this isn’t too surprising because there have been previous studies on the matter that have produced much the same results, but it is nonetheless one more piece of evidence that can be used to persuade interested parties about the benefits of hiring more women for top positions.
Why Does Hiring Women for Top Positions Provide Such Benefits?
As for why this might be the case, well, there are a number of potential explanations. For starters, having more women in top positions serves as a very visible statement about how a particular business will treat its female employees. Essentially, having more women in top positions says that female employees can rise just as high as their male counterparts based on their merits, whereas having no women in those same positions says something much more unpleasant about how the business is being run. Since morale has a huge impact on employee productivity, it isn’t difficult to see how a clear statement of support for gender equality can help companies.
On a related note, gender equality is important for companies that want to secure human talent as well. After all, if ambitious women see that they can’t rise to the top of the place that they are working at, they are going to start looking at their other options sooner rather than later. Even ignoring the fact that this means the loss of a huge percentage of the most motivated individuals in their workforce, this is a serious problem for companies because employees heading elsewhere mean falls in employee morale as well as high employee turnover costs.
Besides this, it should be mentioned that having more diversity among decision-makers tends to be very useful for companies. In part, this is because a wider range of people with a wider range of backgrounds and experiences are less susceptible to falling into groupthink, which has led companies as well as other organizations into some serious disasters in both the past and the present. However, it should also be noted that women tend to have better insight into female consumers because of shared experiences, which is rather important if companies want to sell their products and services to a bit more than half of the total population of the world.
With that said, while much progress has been made, much progress still remains to be made. This is because women are still far from filling about 50 percent of the top positions in companies, which is when society can actually say that gender equality has been reached in this regard. Still, it is clear that the companies that make an effort in this regard are getting rewarded by more than just the good feeling of doing the right thing, which is rather encouraging to say the least.