Stocks with higher percentage of women in management perform better: BofA

COMPANIES that have a higher percentage of women in management outperform those with a lower proportion, noted the Bank of America (BofA).

In a report dated Monday (Mar 6), the bank said such companies not only outperform by 26 percentage points over a five-year period, but also perform better than the benchmark index by 4 percentage points over the same period. 

Notably, stocks with more women managers have been enjoying a two-percentage-point higher average return on equity than companies with fewer women managers over the past 12 years. They were also found to have more attractive environmental, social and governance (ESG) rankings and a lower cost of capital. 

This implies that diversity not only has the potential to add alpha but also improve fundamentals, said BofA.

Companies with more women board members and employees also tended to perform better than their peers.  

Over a five-year period, stocks with a higher proportion of women board members outperformed by 27 percentage points, while those with more women employees outperformed by eight percentage points.

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BofA noted, however, that despite an increasing number of companies in the Asia-Pacific reporting on their management, board and employees’ gender diversity, the proportion of women in such positions has not significantly increased.

Based on the report’s findings, the overall percentage of women managers hovers at slightly above 25 per cent, with little progress seen since 2016. The proportion of women board members stands at 20 per cent in 2020, an increase of just seven percentage points since 2010.

The proportion of women employees in the region has also remained between 34 per cent and 37 per cent over the past 12 years.

This comes even as the number of companies reporting on diversity is more than five times what it was in 2010, at 67 per cent in 2022, which BofA said is an indication that “impediments to achieving gender parity remain”.

The Philippines had the highest percentage of women managers in the Asia-Pacific, at 37 per cent, while New Zealand had the highest proportion of women on the board at 46 per cent.

Singapore had the highest proportion of women employees, at 45 per cent.

South Korea recorded the lowest proportion of both women managers and board members in the Asia-Pacific – at 8 per cent and 9 per cent, respectively. This compares with regional averages of 26 per cent and almost 15 per cent, respectively.

India’s proportion of women managers was second to last at 16 per cent. The country also had the lowest proportion of women employees at 9 per cent, significantly below the average of 37 per cent.

Sector-wise, the healthcare industry had the highest percentage of women managers and board members – at 40 per cent and 19 per cent, respectively.

The materials sector had the lowest percentage of both women managers and employees – at 15 per cent and slightly less than 20 per cent, respectively. But the industry had the second-highest proportion of women board members at 16 per cent.

A large gender pay gap still exists in Asia, with women earning only 83 cents to every dollar that men earn on average, BofA said. The region also falls behind the Organisation for Economic Co-operation and Development average for gender pay gaps.

India, South Korea and China were found to have the largest pay gaps, while the Philippines, New Zealand and Malaysia had the smallest difference. 

Despite improving diversity disclosure in Asia, BofA highlighted that pay disclosure remained low with less than 13 per cent of companies reporting pay by gender, compared with 79 per cent of companies that report on their board’s gender diversity.