Diversity at board and senior management level is essential for business success according to Newton report
Growing evidence to suggest positive correlation between diverse board membership and financial returns.
1 September 2011
Diversity at all levels of management is key to the development of well-run, sustainable companies, according to The dynamics of diversity, a recent report from Newton*, part of BNY Mellon Asset Management.
The publication of Newton's report coincides with renewed emphasis on issues of corporate governance in the aftermath of the financial crisis. The paper highlights several studies including a recently published Citigroup review of companies listed on the Australian stock exchange with women on their boards, which reveals a return on equity of 11.1% higher over five years and 10.7% higher over three years than those companies with no female board members. This latest study corroborates other, well-known research by McKinsey & Co and Catalyst in indicating the positive impact of more inclusive boards on company performance.
Helena Morrissey, chief executive at Newton* and founder of the 30% Club, which aims to increase female board representation of UK companies through voluntary action to 30% by 2015, said: "The financial crisis has highlighted the dangers of 'groupthink' at board and senior management levels. Active debate and robust challenge are crucial to effective decision-making and diverse groups are more likely to identify creative solutions and offer a broader range of perspectives. The empirical evidence of the positive impact of a more diverse board on corporate performance is growing and we expect this issue to become an increasing focus for active investors."
Mandatory quotas on proportions of women on boards have been adopted by Norway and several other European countries are following suit, yet Newton is firm in its belief that this route does not necessarily lead to better shareholder returns, while risking the perception that women have risen to senior positions on the basis of 'box-ticking' rather than on merit. The paper points to the success of the "if not why not" approach to increase the number of women on boards in Australia, where the proportion of female director appointments increased fivefold following the publication of new principles and recommendations on diversity. In the UK, the Financial Reporting Council has recently consulted on whether the 2010 UK Corporate Governance Code should be amended to incorporate specific guidance on the issue of gender diversity. Although not legally enforceable, the Code sets out acknowledged best practice and is relied upon successfully for a variety of corporate activities in the UK.
"This issue is about delivering better business results and that requires real, sustainable changes to business culture," added Morrissey. "In the 21st century global environment, diversity is not simply an optional extra or a distraction. Companies that make a concerted effort to attract and recruit talent from the widest possible talent pool risk are more likely to succeed and to attract investment."
Notes to editors:
Newton is a London-based global asset management subsidiary of The Bank of New York Mellon Corporation and part of BNY Mellon Asset Management. With assets under management of more than £47 billion, including assets managed by Newton Investment Management as dual officers of Newton Capital Management Limited and The Bank of New York Mellon, Newton's group of affiliated companies provides a broad range of award-winning investment products and services to individuals, pension funds, charities and corporations. News and other information about Newton is available at www.newton.co.uk.
BNY Mellon Asset Management is one of the world's leading asset management organizations, encompassing BNY Mellon's affiliated investment management firms and global distribution companies. Information about BNY Mellon Asset Management can be found at www.bnymellonam.com.
BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets. BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, offering superior investment management and investment services through a worldwide client-focused team. It has $26.3 trillion in assets under custody and administration and $1.3 trillion in assets under management, services $11.8 trillion in outstanding debt and processes global payments averaging $1.7 trillion per day. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available at www.bnymellon.com and through www.twitter.com/bnymellon.
*'Newton' includes the following group of affiliated companies: Newton Investment Management Limited, Newton Capital Management Limited and Newton Capital Management LLC. Assets under management include assets managed by all of these companies except Newton Capital Management LLC, which provides marketing services in the U.S. for Newton Capital Management Limited. Except for Newton Capital Management LLC and Newton Capital Management Limited, none of the other Newton companies offer services in the US and Canada. Newton Capital Management Limited is an investment management firm authorized and regulated in the United Kingdom by the Financial Services Authority in the conduct of investment business and is a wholly owned subsidiary of The Bank of New York Mellon Corporation. Registered in England no: 2675952. Newton Capital Management Limited is registered in the United States as an investment adviser under the Investment Advisers Act of 1940. Unless otherwise stated, all information source BNY Mellon Asset Management as at 30 June 2011. This press release is qualified for issuance in the UK and is for information purposes only. It does not constitute an offer or solicitation of securities or investment services or an endorsement thereof in any jurisdiction or in any circumstance in which such offer or solicitation is unlawful or not authorised. This press release is issued by BNY Mellon Asset Management International Limited to members of the financial press and media and the information contained herein should not be construed as investment advice. Past performance is not a guide to future performance. Registered office of BNY Mellon Asset Management International: BNY Mellon Centre, 160 Queen Victoria Street, London, EC4V 4LA. Registered in England no. 1118580. Authorised and regulated by the Financial Services Authority. A BNY Mellon Company(SM).