<p>Women's Day: Higher-rated firms have more women on their boards, says Moody's</p>
Women’s Day: Higher-rated firms have more women on their boards, says Moody’s

Higher-rated companies tend to have a higher proportion of women on their boards, according to Moody’s Investor Service.

“Women account for an average of 29% of the board seats of investment-grade companies (those rated Baa and above), up one percentage point from last year, and an average of 24% of the board seats of speculative-grade companies (those rated Ba and below),” according to a Moody’s report. Companies based in advanced economies exhibit a correlation between board gender diversity and credit ratings, but those in emerging markets do not.

The presence of women on boards – and the potential diversity of opinion they bring – supports good corporate governance, which is positive for credit quality. The data do not demonstrate a direct causation between gender diversity and credit quality.

The trends

“Women hold 35% of the board seats of European companies in our cohort, up from 33% in 2023. North American companies follow closely behind, with female representation on boards rising to 30% from 29% last year. Women account for less than 20% of board seats in Latin America, the Middle East, Africa and Asia-Pacific,” it said.

Women hold nearly one-third of the board seats in service and consumer sectors, such as insurance, retail and

business products, healthcare, pharmaceuticals, utilities and consumer products. “This is largely reflective of corporate boards in Europe and North America, where most of the companies we examined in these sectors are located. Heavy industry and commodity sectors have the lowest percentage of women on boards,” it said.

Board diversity

Women account for an average of 34% of the boards of companies with positive governance characteristics, as indicated by the governance issuer profile scores (G-1) that we have assigned to those companies. This is up from 31% in 2023. Companies with negative exposure to governance considerations (G-4 and G-5) have seen a decline in the average percentage of women on their boards during the same period.

Higher ratings also correlated with greater racial and ethnic diversity on North American boards. The boards of North American investment-grade companies have more women from racial and ethnic minority groups than those of speculative-grade companies, according to our analysis of 1,088 rated companies. This indicates a correlation between credit quality, gender and racial diversity on boards.

  • Published On Mar 8, 2024 at 02:22 PM IST

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