October 21, 2018
05.09.2009 - 04:03PM
Corporate Social Responsibility
By R. Paul Herman
Enterprise Rent-A-Car, likely the most customer-friendly in the industry, is positioning itself to make more money. How? By appointing Pamela Nicholson, who's worked her way up from the front-line ranks when the company was only 200 people over 27 years ago, to the role of President in this family-owned private company.
Does adding women leaders make companies more money? The research of Catalyst.org, a non-profit based in New York, has consistently shown that the top 25% of companies with the largest share of women Directors on a public-company Board beat the bottom quartile companies with a return on equity 53% higher (13.9% for Boards with more women; 9.1% with fewer or no women). For public-company Boards with 3 or more women (the upper echelons of the top quartile), the return on equity skyrockets to 16%. Read more details about higher financial returns when women are represented in leadership which is not yet close to the 50% of women in the population, or the 47% in the workforce. At HIP Investor, we evaluate how companies that represent the population in Boards, executive teams, managers and staff drive higher "Human Impact" which tends to increase "Profit" and financial returns. This Human Impact + Profit, or HIP, correlation can be tracked and a useful measure for both companies and investors.
And the most recent Catalyst study this year shows that a higher proportion of women on the Board typically leads to more women in senior management and roles in lines of business in those companies.
How do women increase financial performance? A wide variety of possible reasons: a more diverse representation of leaders may better understand the variety of customer needs; many women tend to be more collaborative problem-solvers critical to employee engagement and satisfaction; and more women tend to incorporate the longer-term considerations, like environmental sustainability and social impacts.
In 1993, the Women's Equity Fund was founded to invest along the theme of women in leadership at public companies. Its former ticker symbol is FEMMX (Google Finance), currently has liquidity (investor funds) of about $42 million, and became part of the Pax family of funds last year along with the new ticker PXWEX. (Side note: Pax was fined $500,000 last week by the SEC for not adhering to its "socially responsible" mission during 2001-2005.)
Why are fewer women represented in leadership roles? In the past, some have argued that women may not be as technically capable. However, last week, Science magazine has published a study, funded by the National Science Foundation, that there is no math performance gap between girls and boys unlike 20 years ago. The gender disparity has disappeared so how long till there is gender equality in math, science and engineering degrees?
High-tech companies especially await the answer, as they seek to address EEOC (Equal Employment Opportunity Commission) inquiries about the continued gender gaps in computer science hires. The leading high-tech companies seek to recruit the maximum number of women engineers to balance out their ranks, but need a larger pipeline of graduate and undergraduate women in science and math. That will increase their pool of qualified engineers and managers, and contribute to better financial returns from the more diverse pool of problem solvers.
So, how can you influence a company's commitment to equal representation? Research the Boards and executive teams of the products you buy, places you work, and stocks you invest in. You can find this on their websites ("About Us") or on the finance sections of Google or Yahoo. In addition to voting your preferences with your dollars, you will likely be making a great investment choice with the potential for higher returns, lower risk and a commitment to a society where positive Human Impact drives increased Profit and that is HIP for you, your company, your portfolio and your world.
About R. Paul Herman
As a strategist at McKinsey and Omidyar Network, R. Paul Herman helped clients achieve top performance with high-leverage advice and counsel. As an entrepreneur, Paul has delivered innovative customer value and societal impact. As a grantmaker and fundraiser at Ashoka: Innovators for the Public, Paul coached social entrepreneurs towards scale and growth in their impact and viability, while also connecting social investors with those high-impact organizations. Paul's cross-sector experience (business, social and government entities) has led to the formation of the HIP mindset, methodologies and transformative approach.
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