Firms with a female CEO and CFO produce superior stock price performance, compared to the market average and firms with high gender diversity on their board of directors are more profitable and larger than firms with low gender diversity, according to a study released Wednesday from S&P Global Market Intelligence.

“As we look at financial performance, this research is yet another confirmation that women provide significant and positive value through C-suite and board leadership positions,” said Doug Peterson, president and CEO of S&P Global.

Benefit of a female CEO

According to the study, firms with female CEOs saw a 20% increase in stock price momentum, a measure of positive price trend, compared to their male counterparts in the executives’ first 24 months in office. Female CFO’s brought an even more significant impact. Companies that appointed a woman to the top finance role saw a 6% increase in profitability and 8% larger stock returns during the first 24 months in office. Over the 17-year period for the study, firms with female CFOs generated $1.8 trillion more in gross profit than their sector average.

“The evidence is getting louder,” says Beatrice Grech-Cumbo, head of Korn Ferry’s Advancing Women Worldwide initiative. The study, she noted, builds on prior research indicating that organisations with more inclusive teams, such as women in leadership positions, get better performance from individuals, teams and entire organisations. 

Those diverse groups are more likely to produce innovative products and deliver them faster to the market than non-diverse groups. “We really believe that organisations making this change see it as a source of value creation. They don’t just see it as the right thing to do,” Grech-Cumbo says.

Russell 3000

S&P looked at the firms listed in the broad-based Russell 3000 stock index. It analysed the performance after 5,825 new executive appointments, of which 578 were female, since 2002. S&P didn’t find anything that the female leaders were doing anything particularly differently from their male counterparts, but speculated that the women who were being appointed to top jobs were the “tip of the spear,” executives whose abilities and traits were far above those of average leaders. 

That echoes the conclusions from Korn Ferry’s extensive analysis of 58 women who have led large US corporations. The women were in the top 1% in 17 of 20 key leadership traits, says Shannon Hassler, a principal in Advancing Women Worldwide.

But while many organisations have committed to diversifying their leadership bases, as a group they haven’t gotten very far. As of the end of 2018, there were 19 male CEOs for every female CEO and more than six male CFOs for every female CFO. It’s a stark contrast to broader employment demographics, where about half the workforce of large US-based corporations are women. 

A common complaint in Corporate America has been that companies have difficulty finding women with the right experience to fill open leadership and board director positions.

Grech-Cumbo says all organisations can remove barriers to get more women into the leadership pipeline. For instance, giving high-potential talent P&L responsibilities, roles not often given to women or non-white men is an effective way to broaden skills and prepare them to succeed in even larger roles. And, she adds, organisations must recognise that just having diverse voices within leadership brings about clear business benefits. 

Shannon Hassler

Principle

Beatrice Grech-Cumbo

Senior Client Partner, Korn Ferry