Boards without women breed scandal

Public companies with more women on their boards are less likely to be hit by scandals such as bribery, fraud or shareholder battles, according to research from index provider MSCI, which looked at more than 6,500 company boards globally.

The research found that boards with gender diversity above and beyond regulatory mandates or market norms had fewer instances of governance-related scandals.

"There is a clear pattern between having higher than mandated percentages of women on boards and fewer governance-related controversies," the report said.

Matt Moscardi, senior analyst at MSCI, said the findings show a board with few or no women should be a red flag to investors "actively looking to limit the possibility of investment capital being subject to fraud or corruption".

Saker Nusseibeh, chief executive of Hermes Investment Management, said of the findings: "If you are a Neanderthal and need more reasons to try to have women on boards, here is a bloody good one. It clearly shows you reduce the risk on boards if you have more women."

The MSCI research was careful not to draw any conclusions about women's abilities and characteristics, and instead suggested the number of women on a board should be seen as "a single data point in a matrix of progressive governance indicators".

Companies that are more concerned about managing extra-financial risks are more likely to appoint women directors, said Mr Moscardi. This would explain another finding: companies with more than average numbers of female directors score more highly on MSCI's metric for management of environmental, social and governance risks.

MSCI data pointed to 12 global companies with a market capitalisation of more than $25bn that had greater than average governance controversies over the past three years and fewer women on their boards than the country average.

The list includes Bank of New York Mellon, with one woman among 13 directors, and futures exchange CME, with one woman among 29 directors. In Europe, Credit Agricole and Nokia feature on the list, while Indian companies Tata Motors and Reliance Industries also appear.

Anne Richards, chief investment officer of Aberdeen Asset Management, Europe's largest listed fund company, said: "It's not a surprise that more diverse boards have fewer governance issues or scandals. I don't think this is because women are inherently more 'moral' than men. And it's difficult to tease out cause and effect - are better companies more likely to embrace diversity or does diverse leadership make for better companies?

"What we can say with certainty is that gender diversity is a good proxy for more general cognitive diversity, and we know that cognitive diversity leads to better problem solving and outcomes."

Mr Moscardi added there would be a benefit to companies that recruit more widely than the usual white male middle-aged demographic. "Companies thinking about these things will have a bigger pool of talented people," he said.

Fiona Hathorn, managing director of Women on Boards, a women's business network, said of the research: "It does not surprise me. A woman often brings to the boardroom different perspectives and insights, because she may well have been brought up in different way to a man.

"As a consequence ... she is likely to ask different questions and hear different things. Research suggests that women do more due diligence, are more reflective and take more measured risk decisions."

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