GVSU study: Diversity on corporate boards brings value

GRAND RAPIDS — Companies with boards made up of at least 25 percent women or minorities are the most profitable, according to a new study by two Grand Valley State University researchers.

The study, “Representation of Women and Racial Minorities on Fortune 500 Company Boards,” was conducted by Sonia Dalmia, professor of economics, and Claudia Smith-Kelly, associate professor of economics. They were assisted by student research assistants Kathleen Pedres and Kasey Setlock. The study involved examining the composition of Fortune 500 company boards nationally and in Michigan.

The study found that the average size of a company board is approximately 12. “Given the previous result that companies with at least 25 percent of their boards comprised of women are more profitable, this suggests having approximately three women on boards makes a significant difference to a company’s bottom line,” said Dalmia.

The study showed that in spite of increased emphasis on diversifying boards, vacant board seats in 2015-16 were filled mostly by white men. Currently, about 86 percent of male board members and 82 percent of female board members of Fortune 500 companies are white.

“On average, the study found that companies led by female or racial minority CEOs were more profitable, compared to those led by male CEOs,” said Smith-Kelly.

Other findings:

• 4% of Fortune 500 companies are led by a female CEO

• Companies led by a female CEO have greater diversity on their boards compared to companies led by male CEOs

• There are 14 Michigan companies listed on the Fortune 500, only one of which is led by a female CEO (Mary Barra of General Motors).

• 20% of the Fortune 500 company boards are made up of women. In comparison, 22.3% of the Michigan Fortune 500 companies are made up of women.

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