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Diverse corporate boards and companies that embrace diversity lead to better financial performance, according to data presented to the California Public Employees' Retirement System's (CalPERS) Investment Committee.
Globally, companies with one or more women on the board have seen an excess share price Calculate Compound Annual Growth (CAGR) of 3.4 percent over the past 11 years. Companies with male-only boards have seen share prices lose 1.2 percent on average per annum over the same period based on analysis by Credit Suisse. In addition, companies that support lesbian, gay, bisexual, and transgender (LGBT) rights have seen average returns 10 percent or higher.
The data and analysis was reviewed by CalPERS as part of its information gathering efforts leading up to the adoption of a new environmental, social, and governance (ESG) strategy by CalPERS later this year. The presentation focused on the human capital risk and opportunities within the "social" theme of the ESG strategy.
The report, titled Diversity and Inclusion: Evidence on Corporate Performance(PDF), was prepared by Dr. Akosua Barthwell Evans of The Barthwell Group and Julia Dawson of Credit Suisse. Additional findings include that companies with diversity within their organizations have improved competitiveness, better talent management, greater access to capital, more sustainable profits, and better relations with stakeholders.
"This report clearly shows the many advantages of diversity," said Henry Jones, CalPERS Investment Committee Chair. "In this global economy, it simply makes sense that a company with a diverse board and staff will have advantages over a company that doesn't embrace inclusion."
The report also found high risk associated with organizations that lacked diversity. These risks include missed market opportunities, such as engaging with millennials, and slower adaption to new technologies, including higher vulnerability to cybersecurity issues.
View the video of the Diversity & Inclusion presentation.
For more than eight decades, CalPERS has built retirement and health security for state, school, and public agency members who invest their lifework in public service. Our pension fund serves more than 1.8 million members in the CalPERS retirement system and administers benefits for more than 1.4 million members and their families in our health program, making us the largest defined-benefit public pension in the U.S. CalPERS' total fund market value currently stands at approximately $293 billion. For more information, visit www.calpers.ca.gov.
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