Diverse boards result in higher share prices

DIRECTORS with a range of experience in various sectors tend to propel their businesses to a better share price performance, according to a report released yesterday.

Analysis of the share prices of 500 top companies from around the world by law firm Eversheds also suggests that smaller boards produce better returns for investors.

But the report concludes that, despite the benefits of hosting a relatively small number of directors around the boardroom table, this must be balanced with the need to make room for individual directors with niche expertise from other sectors.

A push towards smaller boards also risks damaging the drive to increase the number of women holding top corporate jobs.

“Our research reveals that diversity is still a key priority, with directors now moving the debate beyond gender to also encompass diversity of age, sector and skill sets as well as international experience,” said Eversheds chairman John Heaps.

“However, the trend towards smaller boards means that achieving this diversity is becoming an increasing challenge.”

The report suggests companies perform better when they have more serving executives from within the business sitting on the board. This goes against a global trend that has seen the average number of executive directors on a board fall by a third between 2007 and 2012.

At the same time directors have tended to stay in their jobs for longer, with the average director now serving for 6.7 years on a board.

Meanwhile last year’s much-vaunted shareholder spring is found to have little effect, although companies are found to perform better if they have a number of substantial investors in regular contact with directors.