Previously, we have asked whether the number of women on boards has a relationship to corporate financial performance. Research suggests that it has. But is that the whole story? Does the number of women on boards reflect companies’ overall approach to managing human capital and their financial performance?

In its Sustainable Development Goals for 2030, the United Nations set out a vision of a world that includes economic growth, increases in productivity and the eradication of gender discrimination so that women have “full and effective participation and equal opportunities for leadership at all levels.” Our latest research suggests the connection between these goals is relevant to investors.

Companies failing to employ women – at any level – in numbers proportional to their availability are by definition limiting the size of their talent pool. In contrast, higher numbers of women, especially in senior positions, might indicate a savvier approach to talent – one that just might promote productivity and economic growth along with gender equality.

We looked at talent management practices and female board representation across 617 MSCI ACWI Index companies in the consumer discretionary, consumer staples and industrials sectors and the banking industry.1 We identified a set of Talent Leaders (those with strong talent management practices, including things like regular engagement surveys, leadership training and support for continuing education) and Talent Laggards (those with no evidence of any such practices). Talent Leaders were far more likely than Talent Laggards to have a critical mass of female directors (at least three for three years in a row, 2014-2016), while Talent Laggards were much more likely to have few or no women on the board. That is to say, companies investing in their workforce were probably also promoting women at high levels, and vice versa.

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