Can having women board members improve a company's profits?
"That's the $64,000 question," said David A. Carter, associate
professor of finance at Oklahoma State University's Spears School of
Business. "It seems like a straightforward proposition. But in
practice, it's very difficult."
Hoping to get beyond the loaded politics behind that diversity
question, a trio of OSU professors sought to quantify that answer
statistically by studying earnings of the Standard & Poor's 1,500
Index companies. But that answer proved as elusive as the economy's
"The statistical analysis, depending on how you do it, will give
you different answers," said Gary Simpson, a professor of finance
and the Oklahoma Bankers Association chair of Commercial Bank
Management. "The results are not robust to the methodology."
As the Enron scandal heightened public scrutiny on corporate
boards of directors, Carter joined with Simpson and Betty Simkins to
study the impact women directors had on 2003 corporate financial
results. They approached this by statistically factoring out time-
sensitive issues, such as the lingering 9/11 recession and natural
gas trading scandal, and differences separating the economic sectors
of these S&P companies, such as banking and manufacturing.
That provided a constant for comparing base earnings to board
composition, all without trying to judge the value of women
directors, their different insights or their decision-making
"We don't actually trace it through everything that happens,"
said Simpson, explaining how the study didn't analyze individual
board actions. "We just look at the number of women on the board and
what is the result."
Their first paper, covering 2003 financial results, found a
definitive correlation between rising corporate profits and the
percentage of women on the board. Simpson said that positive result
drew their study widespread attention and numerous research and
Their second study, which added data through 2007, proved far
"Normally when you have a really nice positive relationship, the
methodology will often be robust," said Carter. "That this is not,
it tells me that the relationship is sort of at the margin.
"I guess the bottom line is that there's still no definitive
answer," he said. "The results are still very sensitive to the
That led Simpson to a bottom-line contingency view.
"That is the way of a lot of things in the world," he said.
"Unfortunately for anybody who wants a good clean result, basically
it depends on the company. …