Investors May Prefer Companies With More Women In The Workforce
You have $1, and you're thinking about investing it in the stock market. All you know about the company you're going to invest in is that it's a tech company with more women on its workforce than the average tech firm.
How much of your dollar do you invest?
In an experiment, researchers found that investors were more likely to bet that a company's stock price would increase if it had more women on staff than average. That suggests investors see value in gender diversity and that companies that hire more women could see their stock prices rise. Those are among the findings of a new study by Stanford University, Northwestern University, Dartmouth College and the Hong Kong University of Science and Technology.
The study focused on dozens of companies in the tech and finance industries. And those who participated in the experiment had one thing in common — they all reported they had some kind of managerial experience.
Jennifer Dannals, a Dartmouth researcher on the study, said participants valued companies with better gender diversity numbers, because they expect those companies to be more innovative and creative.
Investors could also prefer these companies for personal or ethical reasons, Dannals said. Some people like to invest in companies to support social or political goals, including the goal of employing more women.
This study is different, because most other research has focused on diversity among leaders at a company.
This study focused on the power and value of the workforce. And it's based on data that only recently became available, as tech companies began sharing diversity statistics five years ago. According to Google's 2019 report, its workforce comprised 32% women. Facebook reported 36.9% of its workforce was women.
Researchers found the same trend in the financial sector using diversity data released by the Financial Times in 2017. They concluded that both tech and finance companies are underinvesting in gender diversity.
Gender diversity can also play a role in improving a company's bottom line. Sundiatu Dixon-Fyle, a diversity and inclusion expert at consulting firm McKinsey & Co., said the firm's research has focused on how more diverse leadership translates into financial gains.
Gender diversity in the very top ranks of companies, such as CEOs and chief financial officers, leads to a better chance the company will outperform the industry, she said. But there can be other reasons in the mix.
"We are not claiming that you add more women to your executive team and that will automatically increase your financial performance," Dixon-Fyle said. "But what we are observing is that there is a statistically significant correlation."
Dixon-Fyle said she is not surprised by the findings of the new study on workforce diversity. Investors have an opportunity to influence gender diversity, she said.
Peter Talbot is an intern on the NPR Business Desk.