Investing in Women Literally Pays Off for Tech Companies

Karen Riccio

August 24, 2017

6 Min Read
Investing in Women Literally Pays Off for Tech Companies
IBM CEO Ginni Rometty (L) looks on as Vice President of Business Development for SoftBank Robotics Kenichi Yoshida introduces SoftBank's emotion-reading robot Pepper during Rometty's keynote address at CES 2016 at The Venetian Las Vegas on January 6, 2016 in Las Vegas, Nevada.Ethan Miller/Getty Images

Note from the editor: Today we’re launching a series on women in the data center industry and the world of tech in general. The recent scandal that started with the now former Google engineer James Damore’s “memo” on women in tech demonstrates that for all its forward-looking ideals, the tech sector as a whole continues to suffer from severe gender ignorance (to put it mildly), and if you’re a regular DCK reader, chances are you work in the data center industry and know just how few women work in this space. With this series we hope to shine a light on the challenges that resulted in this state of affairs and challenges this state of affairs is creating for the industry and women who contribute the bulk of their waking hours to it.

It turns out that investing in women is smarter and more profitable than ever before—especially for technology companies.

Several studies have revealed that generally, companies with females in C-level positions and on their boards experienced better performance and profitability than their predominantly male-run counterparts.

There’s a Credit Suisse study showing that companies with higher percentages of women in senior management outperformed companies with lower percentages over a five-year period in terms of share price and return on equity (ROE).

Another study done by Sodexo found that companies with 40 percent to 60 percent women in management performed better than those with lower percentages of women on key indicators, including brand awareness, client retention, and financial performance.

Unfortunately, other studies have also pointed out that corporate America has a long way to go when it comes to gender diversity.

See also: The Data Center Industry Has a Problem: Too Many Men

After surveying 22,000 firms, Peterson Institute reported that almost 60 percent had no female board members, just over half had no female C-suite executives, and fewer than 5 percent had a female CEO.

At the current rate of progress, the institute says it will take 117 years to achieve global gender parity in the workplace.

Women and Technology a Profitable Mix

Oddly enough, the traditionally male-dominated technology sector is ahead of the pack and stands to gain more from hiring women than any other industry.

Morgan Stanley’s recent report revealed that over the five years ended September 2016, highly gender-diverse tech companies returned on average 5.4 percent more annually than the average yearly returns of their peers with less gender diversity.

An even more eye-opening statistic from the report is that technology companies also get a bigger bang for their buck than companies in other gender-diversified sectors, which only returned an average 1 to 2 percent more than their less diverse peers.

Eva Zlotnicka, lead analyst on the report, concluded: “What is apparent is that tech companies and their investors are missing a big opportunity by not employing more women.”

So, clearly this push for gender diversity isn’t about a bunch of leftover feminists from the 1960s trying to make waves. It’s about global professional women’s organizations like Ellevate Network with 34,000 members, who all have points to make.

Investing in Women, Literally

That’s especially true of Sallie L. Krawcheck, head of the network, CEO, and co-founder of Ellevest, a digital financial advisor for women launched in 2016. She’s also former CEO of Merrill Lynch and chair for the $146 million Pax Ellevate Global Women’s Fund (NASDAQ:PXWEX). It is the first fund of its kind.

“We wanted to prove in real-time, with real money, that companies with more women in leadership can deliver better investment returns,” Krawcheck wrote in a company blog. “We wanted to offer investors the opportunity to invest in these companies, and to benefit from their vision and their success. And guess what? The strategy has been working.”

According to Yahoo! Finance, PXWEX has returned 25 percent over one year ending July 30, an average of 11 percent over five years, and even kicks in a 1.5 percent dividend.

Five of the fund’s top 10 holdings were IT companies as of June 30: Microsoft, Texas Instruments, Facebook, Salesforce, and Alphabet, the parent company of Google. In total, it invests in 26 IT companies, representing nearly 19 percent of the fund by weight. Others include: KeyCorp, GoDaddy, IBM, Schneider Electric, Cisco, HP Inc., and Symantec.

Ninety-nine percent of the companies in the fund have two or more women on their board of directors. Further, 33 percent of board seats and 27 percent of executive management positions are held by women, compared to global averages of 16 percent and 16 percent, respectively.

Key Drivers Behind Movement

Heather Smith, lead sustainability research analyst for Pax World, told Data Center Knowledge that she believes three things are driving increased diversity in the technology sector:

  • Peer pressure: “As more companies take steps to improve diversity and provide transparency around their efforts, those that fail to act will be missing a significant opportunity, could fall behind competitors, and could face reputational risks. Technology companies wish to be seen as savvy and forward-thinking, not as dinosaurs, so we believe this issue resonates specifically with the tech sector.”

  • The business case: “Forward-thinking companies are increasingly recognizing that diversity and inclusion are integral parts of business strategy.”

  • Investor pressure: “The national conversation around gender diversity is accelerating. Investors are asking for more diversity and are actively engaging with companies on issues ranging from board diversity to pay equity.”

In fact, Smith thinks that diversity is imperative for technology companies to not only grow but remain competitive.

“Talent recruitment and retention are critical issues for the tech sector – and we believe that companies that are more forward-thinking when it comes to diversity and inclusion will have an advantage.”

That’s often easier said than done.

We’ve Got a Long Way to Go, Baby

While the Morgan Stanley report attributed a lack of women in technology to “hostile workplace culture (or the perception thereof), isolation, long hours, travel, and mysterious career advancement,” it also pointed out other issues involving the ability to attract, hire, and retain females that need to be addressed.

One of the most long-standing factors is that fewer women study science, technology, engineering, and math (STEM) subjects; and those who do, often exit prematurely.

The challenge for us today is to bring awareness to the gender diversity movement and learn from those who’ve succeeded in technology. But this isn’t just about women from Fortune 500 companies at the top of their game, the likes of Safra Catz, co-CEO of Oracle; HPE CEO Meg Whitman; IBM’s top dog Ginni Rometty; or former Yahoo! chief Marissa Mayer—the four highest-paid CEOs in 2016.

This is about women with the skills, passion, perseverance, and patience to own key technology and data center roles, be they CSOs, engineers, designers, consultants, IT and facilities managers, or STEM students at the start of their mostly unpaved career path.

Over the next few weeks, DCK will publish a series of articles about and from women in the data center industry, starting with the elite panelists from Data Center World, a leading conference and trade show for IT and facilities professionals produced with participation of AFCOM.

The second story in the series is by Carrie Goetz, global director of technology for Paige DataCom, is coming out next week. Be sure to keep it on your radar.

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