The Morgan Stanley research finds that, on a global level, companies that have taken a holistic approach towards equal representation outperformed their less diverse peers by 2.8% per annum over the last eight years. Its data reveals that stocks of gender diverse companies tend to be larger, have a higher yield and to lean towards a lower beta. Stocks of gender diverse companies also outperform their less diverse regional peers, even after controlling for size, yield, profitability and risk.
The HERS model
To measure organisational gender diversity, the investment bank has created what it terms its Holistic Equal Representation Score (HERS). The HERS model is designed to help investors identify organisations that are leading the field in gender diversity. The HERS model uses four metrics to calculate an equal representation score that ranks companies on their level of gender diversity based on the percentage of women who are board members, executives, managers, and employees.
The HERS analysis was created using data from January 2010 to May 2019 for constituents of the MSCI World Index, broken into 4 regions: DM Asia ex-Japan, Japan, Europe and North America.
Morgan Stanley hopes that investors will find its HER Score useful when selecting stocks to invest in. The data may also prove useful to board members and executive search providers looking to recruit for board vacancies.
Gender diversity board trends
The Morgan Stanley research found that since 2010 there has been an increase in gender diversity within corporates and much of this improvement is at board level. Globally, 17% of companies have more female executives than board members, but 46% have more women on the board than at the executive level.
The number of women on boards has risen by over 50% since 2010, with Europe leading the way. Asia has seen the most impressive improvements with its number of women executives, more than doubling since 2010.
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