Better profits for companies with women and more ethnic groups on their boards

COMPANIES with diverse boardrooms that include women and a range of ethnic groups tend to generate far better financial returns, a new study has concluded.

The study also found that female representation in the boardrooms of Singapore-listed companies has barely improved over the past year, and still lags the region.

The annual study is produced by the National University of Singapore Business School's Centre for Governance, Institutions and Organisations (CGIO) and the group, BoardAgender.

The latest study looked at 676 listed companies here, and for the first time examined ethnic and age diversity, as well as gender diversity.

It found that companies that have both women and men, at least two ethnic groups and two generations represented in their boardrooms have significantly higher return on assets (ROA) - a widely-used measure of profitability.

These diverse companies enjoy average gains of 5.1 per cent, compared with the average of 1.1 per cent at firms displaying none of these diversity indicators, study said.

Companies with at least one female director in the boardroom - 43.8 per cent - performed better, enjoying an average ROA of 3.3 per cent, compared with 0.3 per cent at firms with all-male boards. There were no all-female boards.

"Our study demonstrates that boardroom diversity is associated with significantly higher profitability, and this holds true for all types of diversity we measured: whether it be gender, age or ethnicity. The message is loud and clear: companies should tap, and benefit from, the rich, diverse pool of talented professionals within Singapore society," said Associate Professor Marleen Dieleman, co-author and associate director of CGIO, NUS Business School.

The study found that women account for just 8.3 per cent of directors on Singapore-listed company boards, up from 7.9 per cent in last year's report.