Dive Brief:

• Companies with higher proportions of women on their boards tend to achieve higher credit ratings than those with lower female representation, Moody’s Investors Service said, noting the value offered by boards with a range of viewpoints.
• “Companies based in advanced economies exhibit a correlation between board gender diversity and credit ratings,” Moody’s said. “The presence of women on boards, and the potential diversity they bring, supports good corporate governance, which is positive for credit quality.”
• The proportion of board seats held by women at North American companies rose to 30% this year from 29% in 2023 and 21% in 2019, Moody’s said. Europe-based companies increased such representation to 35% this year from 33% in 2023 and 21% in 2019. At the same time, “the data do not demonstrate direct causation between gender diversity and credit quality,” Moody’s said.

Dive Insight:

The Securities and Exchange Commission is considering proposing a regulation requiring publicly traded companies to file disclosures on the diversity of board members and nominees.

The agency in 2021 approved a Nasdaq rule mandating that companies listed on the exchange annually disclose board diversity statistics and either achieve diversity based on gender and race or explain why they have not complied. Companies must have one female board member and another from an “underrepresented minority.”

The rule survived a court challenge in October and took effect at the end of last year.

The Nasdaq requirement “reflect calls from investors for greater transparency about the people who lead public companies,” SEC Chair Gary Gensler said in a statement after the agency granted approval in August 2021.

The standards “will allow investors to gain a better understanding of Nasdaq-listed companies’ approach to board diversity, while ensuring that those companies have a flexibility to make decisions that best serve their shareholders,” Gensler said.

On a global basis, women account for an average of 29% of the board seats of investment-grade companies, or those rated Baa and above, Moody’s found after analyzing 3,138 companies that it rates worldwide. In contrast, speculative-grade companies include women in 24% of board seats.

“We view the presence of women on boards — and the potential diversity of opinion they can bring — supports good corporate governance, which is positive for credit quality,” Ana Rayes, a vice president and senior analyst at Moody’s, said Tuesday in an email response to questions.

For example, “women may have a better understanding of certain customer demographics,” Rayes said. “This can bring valuable insights that can lead to better product development, marketing strategies and potentially leading to increased sales.”

Also, “women may be more likely to promote an inclusive leadership style, potentially driving diversity and inclusion initiatives,” according to Rayes. “This could facilitate recruitment and promotion of underrepresented groups, leading to a more diverse and innovative workforce.”

Moody’s expects an increase in the proportion of women on boards in coming years, she said.

“We believe this trend is likely to continue amid state diversity mandates and continued calls for greater gender diversity from prominent stakeholders, such as proxy advisory firm Institutional Shareholder Services Inc. and asset managers like BlackRock and State Street Global Advisors,” Rayes said.

Despite recent efforts to increase the number of female board members from minority groups, they occupy only about 6% of the board seats at North American companies rated by Moody’s, the rating firm said.

“An average of 83% of female board members are Caucasian, with black women occupying an average of 10% of seats, followed by women of Asian (5%), Hispanic/Latino (1%) and Middle Eastern (1%) descent,” Moody’s said.

Higher credit ratings also correlated with greater racial and ethnic diversity among boards of 1,088 rated companies based in North America, Moody’s said.