The better a tech company’s gender diversity, the greater its returns, on average. So, says bank giant Morgan Stanley.
Morgan Stanley came to this conclusion after reviewing research conducted by its Sustainability and Global Quantitative Research teams.
“The lack of women in technology companies isn't just a question for academic research and industry debate, it should also be of interest to investors,” the bank’s research concluded.
The research revealed that technology ranks low for gender diversity. The research teams found that the tech firms that do make an effort to boost diversity can generate significantly better returns than those who do not.
A new report by the team ranks 108 tech companies, based on a common gender diversity investment framework. It found that, over the five years ended September, 2016, highly gender-diverse tech companies returned on average 5.4 percent more on an annual basis than the average yearly returns of their peers with less gender diversity.
Hiring more women pays dividends
Tech companies get a big boost to their returns from employing more women at all levels of the firm than do companies with similar levels of gender diversity in other sectors, the research shows. Highly gender diverse companies in other sectors returned an average 1-to-2 percent more on an annualized basis than their less diverse peers.
“What is apparent is that tech companies and their investors are missing a big opportunity by not employing more women, Eva Zlotnicka, lead analyst on the report, said in a statement.
After analyzing 1,600 corporations across all sectors, Morgan Stanley found that companies with better gender equality tend to have stronger fundamentals and better risk-adjusted performance.
The upshot: “Tech companies that aren't focusing on gender diversity are missing an opportunity," Zlotnicka says.
For female representation across all employment levels, the tech sector ranks near the bottom, on par with or below sectors such as energy, utilities and industrials, according to the research.
Gender diversity differs across tech subsectors, with communications equipment and internet industries among the areas with the strongest gender diversity. Information technology is the most mixed, doing well in terms of women represented across employment levels, but poorly on equality of pay, at least compared with the rest of tech. Electronic instruments and components, semiconductors and tech hardware firms lag behind the most.
More gender equality, particularly in corporate settings, likely corresponds with increased productivity; greater innovation; higher employee retention and better risk management—all critical factors for improving a tech company's odds of staying competitive.