Property Australia

Gender diversity leads to better company performance

PROPERTY AUSTRALIA June 21, 2022

Increasing female presence in senior management teams resulted in higher profit margins and better firm performance, according to a new study from Realindex, Beyond Lip Service: tracking the impact of the gender diversity gap.

The study investigated a cross-section of corporations internationally, including more than 30 countries and over 2500 large size enterprises, and spanning more than a decade, beginning in 2009.

It found in any given year, higher-diversity firms (those approximately in the top one-third of all firms) have about 20 per cent higher margins in the following 12 months than lower-diversity firms (those approximately in the bottom one-third of all firms).

As report co-author Dr Ron Guido told a recent Property Council event, in terms of EBIT margins, diversity in senior management is correlated with approximately 30 per cent higher future profit margins, while the diversity at the board level board has less significant effect.

“Certainly, relative to lower diverse firms, companies that have high diversity, the top third in our sample tend to produce 10 to 20 per cent higher profit margins than their peers that have low diversity,” he said.

“We find that that was consistent across net profit margins, gross profit margins, and across time. It was interesting that we found that it was senior management that had a greater impact in terms of its diversity on the team than in the board. 

“We find that for companies that have higher diversity in their boards, they can generate almost a roughly 20 per cent improvement in their return on equity or other profitability metrics that we used in the report. What was even more surprising is that that improvement, or that differential was even greater for senior management.”

Dr Joanna Nash, co-author of the report, told the crowd that countries like Australia or the UK, which had disclosure requirements around gender diversity but not quotas, got to 30 per cent representation, but took longer to do it, and countries that did nothing, took longer still. 

In 2010 Australian listed companies had to disclose the number of women at board, senior management, and company level, while in 2019 the ASX 300 companies were required to have an objective of 30 per cent female representation at the board level. 

The report found that since 2010, there has been a steep increase in the number of women on boards. Starting from a low base of around 10 per cent in 2011, it has steadily increased to just below 30 per cent at December 2021. 

The number of women in senior management has also been increasing from 12 per cent to around 26 per cent by December 2021, although the increase has tailed off in recent years.

The report found that Australia was leading the pack in gender representation in improving not only board representation, but senior management representation. 

CEO of Cromwell Property Jonathon Callaghan said company policies such as parental leave and flexible working arrangements can help in not just hiring more women but retaining them. 

“There are attitudinal issues to some extent,” he said. “I feel that a lot of work has been done on the attitudinal side of things.

“I think they're particularly the property industry discussion around targets and 40/40/20. I think we've moved on, and there's not too much backlash about that.

“I really believe you don't have diversity without inclusion, it's all very well to have women sitting around the table, but unless you listen to their voice, you don't really have it.”

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