MANILA -Philippine listed firms with female board members saw better profitability during the global health crisis, underscoring the unique financial benefits of boardroom diversity, a new study by the Institute of Corporate Directors (ICD) showed.
Recent findings in the ICD report that tracked data from 2019 through 2021 covering over 270 listed firms concluded that “the presence of women directors in boards had a significant relationship” with the companies’ return on equity (ROE) in the years after 2019.
“Among the key findings of the study linked boards’ gender diversity to better ROE. Companies with women directors outperformed companies purely held by male directors,” ICD said in a separate statement.
The ratio of female to male directors was on the rise during the study period, from 17:83 in 2019, 18:82 in 2020, to 19:81 in 2021. ICD said an additional eight, 20 and 30 female directors in publicly listed companies were elected, respectively, in 2019, 2020 and 2021.
The ICD study also noted that board directors’ seniority in terms of age and “presumably in business knowledge and experience” was also correlated with better ROE.
“Based on statistical tests done, age and average ROE are significantly and directly related. This means that as average ages go up, ROE tends to go up, too,” ICD noted.
In terms of diversity in board directors’ expertise, the study indicated that companies with nonexecutive directors and directors who are experts in business management (2019 and 2021), and finance (2020) performed better than counterparts.
“As business trends and demands continuously evolve over time, newer board directors might have just as much expertise to offer as their longer-serving counterparts,” said Helen de Guzman, outgoing chair of the ICD board diversity and inclusion committee, which conducted the study.
“Relatively fresh and dynamic beliefs and principles held by the newer ones can also help in improving ROE as the traditional ones long-held by the more senior,” she added.
ICD’s counterparts in Singapore and Malaysia also presented similar research on board diversity conducted in their respective countries.
“In continuing the Philippine study, we will be looking at adding more dimensions as well as other metrics to measure company performance to better understand the correlation of diversity and inclusion on a business’ success,” said Monette Iturralde-Hamlin, the incoming chair of the ICD board diversity and inclusion committee. INQ
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