Board gender diversity is part of a larger picture of human capital quality and may serve as an indicator of attention to talent management at the board level. This paper looks at: 

1. Can board gender diversity information serve as a proxy or indication of attention to talent management across the firm? 
2. Have firms with comprehensive attention to talent management (i.e., across the firm, including the board) experienced higher productivity rates than those without? 
3. Have firms with comprehensive attention to talent management experienced better financial performance than those without?

There was a striking difference in the makeup of talent leaders and talent laggards by board gender composition. Nearly half (48%) of talent leaders were companies with consistently at least three women on the board (3+ WOB), versus 30% of all companies analysed and only 10% of talent laggards. In contrast, three-fifths of the talent laggards were companies with consistently one or zero women on the board (of which two-thirds, or 38% of all talent laggards, had no female directors at any time from 2014-2016), versus 36% of all companies and only 17% of talent leaders.

The absence of women on the boards of talent laggards seemed to correspond to more significant human capital problems. The more consistently male a talent laggards company’s board was, the more its employee productivity growth trailed its peers.

MSCI found strong relationships supported the thesis that higher numbers of female directors could indicate a higher level of attention to talent management firm-wide. Companies with a critical mass of female directors (three or more each year from 2014 to 2016) were substantially more likely than average to also have strong human capital management practices, and vice versa. Further, MSCI found substantial differences in employee productivity growth between these groups, with the highest growth relative to industry peers found in companies with diverse boards and leading workforce management practices. These firms experienced stronger productivity growth than those with diverse boards only and those with strong workforce management only over a three-year period. In contrast, companies with few or no women on the board and lagging practices experienced lower employee productivity growth than their industry peers on average during the same time frame.

Finally, MSCI found that average dividend payout ratios and return on equity figures were consistently higher over three years for the companies with three or more women on their board and leading talent management practices than for those with mostly male boards and lagging talent management practices. Collectively, these findings may bolster the idea that board gender diversity is a reflection of the attention being paid by companies to human capital recruitment, management and development. Executed effectively, this could contribute to higher long-term value creation by the firm. Companies prioritising talent at all levels, including the board, consistently outperformed all other groups analysed in this study, while companies that failed to make talent management a priority across the firm consistently underperformed.

1. Firms with leading talent management practices were 4.6 times more likely to have a critical mass of female directors than those with lagging practices; talent management laggards were 3.5 times more likely than the leaders to have mostly male boards.
2. Companies with diverse boards (3+ female directors over three years) and leading talent management practices experienced growth in employee productivity (compound annualised growth rate [CAGR] of revenue per employee from 2012-2016) that averaged 1.2 percentage points above their industry medians. This rate exceeded those for firms with just a diverse board and for firms with only strong talent management.
3. Companies with both mostly male boards and lagging talent management practices experienced growth in employee productivity that averaged 1.2 percentage points below their industry median. They also trailed companies that just had mostly male boards and those with only lagging talent management practices.
4. Average dividend payout ratios and return on equity figures were consistently higher over three years for the companies with three or more women on their board and leading talent management practices than for those with mostly male boards and lagging talent management practices.
5. Companies with both a more diverse board and stronger talent management practices enjoyed higher growth in employee productivity compared to companies with a diverse board only and to companies with strong talent management practices only.
6. Board gender diversity is part of a larger picture of human capital quality and may serve as an indicator of attention to talent management at the board level.
7. Five human capital management metrics from MSCI’s ESG Metrics dataset were utilised to assess the strength of companies’ talent management practices (as of Dec. 5, 2017): workforce engagement surveys, leadership training programs, workforce diversity, training hours and support for degree programs. Using this data, MSCI identified companies to be either Leaders or Laggards. The majority of companies fell in between.
   
8. Talent Leaders showed evidence of some best practices such as annual engagement surveys, comprehensive succession planning and development programs at multiple levels, quantitative diversity targets in the recruitment process, reporting annual training hours per employee, and/or and offering support for degree programs and certifications to employees.
9. Talent Laggards had not publicly disclosed any evidence of employee engagement initiatives, plans to improve diversity in workforce or training, or development activities.