A new report suggests that female representation in the executive suite may help improve a company’s bottom-line—by billions.
According to a new study by S&P Global Market Intelligence, firms who appoint women into CEO and CFO positions are outperforming relative to their male counterparts — and are boosting their firms’ financial performance.
The study looked at companies on the Russell 3000 Index that appointed new CEOs and CFOs. Over the course a 17-year period, data found that female CFOs generated a combined $1.8 trillion more in profit excess than the averages of the sector averages.
“What we found was that there are common attributes amongst both men and women that are associated with outperformance. Female executives simply seem to have these attributes more frequently,” Daniel Sandberg, the study’s author and S&P’s senior director of quantamental research, told Yahoo Finance in an interview.
Notable progress has been made over recent years, with companies promoting women to the top ranks — like Mary T. Barra at General Motors (GM), Amy Hood being appointed CFO of Microsoft (MSFT) and Jennifer Piepszak to CFO at JPMorgan Chase (JPM), the largest U.S. bank.
Despite these gains, female executives remain underrepresented, with the male-to-female ratio of 19:1 for CEOs and 6.5:1 for CFOs, at the end of 2018, data showed.
Sandberg had a theory for why women-led companies remain so rare, given that male and female leaders surveyed by S&P’s study were found to have had similarities in their biographies.
“I think that higher level of selectivity basically translates to a higher bar for women to get into these positions,” said Sandberg.
S&P’s data suggested companies have real incentive to boost female representation in the executive suite. The study found that in the 24 months after taking on the role, female CEOs saw a 20% increase in stock price compared to their male counterpoints. Similarly, data found that profitability climbed 6% at companies with female CFOs, and 8% larger stock returns.
The firm used artificial intelligence and language processing to analyze newly appointed executives' biographies, in order to find attributes associated with success. “Technology and leadership seems to stand out as individual attributes that that really were associated with higher success,” said Sandberg.
Sarah Smith is a Segment Producer/Booker at Yahoo Finance. Follow her on Twitter @sarahasmith