Long women, short men

In 2011 the Lord Davies report, Women on Boards, recommended that FTSE 100 companies should aim to meet a target of 25% women on boards by 2015. The report observed that at the prevailing rate of change it would take more than 70 years to achieve gender-balanced boardrooms in the UK. The report commented, “This pace of change is not good enough.”

A new report,The Female FTSE Board Report 2014, from the Cranfield International Centre For Women Leaders aims to provide an update on progress following the Davies report.

The main statistics are summarised in the following table from the new report.

Women directors in FTSE 350 companies_summaryThe key finding is that FTSE 100 companies have increased the number of women on their board from 12.5% in 2011 to 20.7% today, with the FTSE 250 similarly increasing from 7.8% to 15.6%.

By 2014, 36 companies in the FTSE 100 had reached the target of 25% women on boards; and the report forecasts that a figure of 26.7% women on boards should be reached by 31 December 2015.

The ten FTSE 100 companies with the highest proportion of women on the boards is shown in the following table from the report.

Women directors - top 10 companies in FTSE 100Only two FTSE 100 companies have no women board members: Glencore Xstrata and Antofagasta.

It seems the number of female executive directorships is still pretty low: 6.9% (FTSE 100), 5.3% (FTSE 250); but the number of female CEOs has slightly increased, to four with Moya Greene (Royal Mail) and Carolyn McCall (EasyJet) last year joining Angela Ahrendts (Burberry) and Alison Cooper (Imperial Tobacco).


All very well, but what impact might all this have on companies’ share price performance?

We decided to have a look…

The following chart shows the performance of a portfolio comprising the 36 FTSE 100 companies that have met the target of 25% women on their boards. The analysis starts from 2011, the date of the Davies Report, and the FTSE 100 is added for comparison.

Women directors - performance of portfolio over 25bFrom the beginning of 2011 the portfolio has risen 28% in value, against an increase of 11% in the FTSE 100 Index.

The following chart is the same as the above, except a new portfolio is added: this new portfolio comprises the ten companies with the highest proportion of women on boards (as shown in the above table).

Women directors - performance of portfolio Top 10cA portfolio of just the ten companies with the highest female director weighting would have increased in value 37% over the period.

It would appear that since 2011 a portfolio of companies matching or exceeding the Davies Report target of 25% female board members would have out-performed the market. Further, portfolio performance would appear to be enhanced the greater the proportion of women on the board.

If this is the case then the obvious arbitrage strategy is long women short men.

Reference

Women on boards (February 2011)

The Female FTSE Board Report 2014 (2014), Susan Vinnicombe, Elena Doldor and Caroline Turner, Cranfield International Centre For Women Leaders

 

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