But if a quantitative reason based on stock-market returns is needed, Morgan Stanley has it.
Strategists at the bank recently updated their study on 1,600 public companies around the world and found that the shares of public companies that are more gender diverse experience less volatility and outperform those that aren't.
The study found that:
- Among stocks that rank high on Morgan Stanley's selection model, those with high gender diversity delivered much better risk adjusted returns.
- Since 2011, companies that were more diverse outperformed their counterparts by 1.5%.
- Year-to-date, the market has rewarded diverse companies "quite generously," although North America is an exception. That may be because of the rally in small-caps; larger companies tend to be more diverse.
- Stocks that rank low on diversity have the highest return volatility and the highest probability of experiencing sharp drawdowns.
These reasons move gender diversity to something investors must seriously consider to reduce volatility in their portfolio, said Adam Parker, Morgan Stanley's chief US equity strategist.
"I don't think anybody is going to walk in the office and say 'we think diversity is a bad idea, we think buying companies with all white guys that are over 40 is a great idea,'" Parker told Business Insider.
This research takes that sentiment "from the ambiguous to the concrete," he said.
Morgan Stanley
It's not just more women
Morgan Stanley
Apart from a headcount of women at executive level and below, Morgan Stanley examined other measures like pay parity, diversity policies, and maternity leave benefits.
It further screened the companies by geography to avoid any apples-to-oranges comparisons.
Morgan Stanley is gradually factoring the findings into its forecasts for equity returns, alongside other metrics like technicals, earnings revisions and valuations.
"Ultimately, we'll be able to observe whether this boosted-up ranking outperforms the ranking we would have had before we did the gender diversity work," Parker said.
"And assuming that continues to be the case as has been, then we may just throw out the existing ranking and only have the gender-diversity-boosted framework."
The five US stocks in the top quintile of both the existing, non-gender-diversity-using model and the gender diversity model were JP Morgan, Walmart, Verizon, Pfizer, and Merck. Royal Dutch Shell, Total, and GlaxoSmithKline topped the European list.
Why diverse companies do better
There's existing research which demonstrates that diverse workforces perform better financially. For one, there's less risk of groupthink that leads to poor decision-making when everyone in the boardroom looks and thinks similarly.
Where stock-market performance is concerned, it's trickier to prove causality.
Eva Zlotnicka, an equity strategist at Morgan Stanley, said there may be cost benefits for diverse companies.
She pointed to the tech sector, where there's competition for talent and companies with better maternity leave policies kept the best women around. YouTube CEO Susan Wojcicki said in 2014 that the company saw a 50% drop in turnover among new moms after it increased its leave time from 12 weeks to 18 weeks in 2007.
By retaining top talent, companies can spend less on recruiting and training, and avoid bleeding some of the institutional knowledge that gives them a competitive edge.
And so, not only can investors earn higher returns from investing in better-run companies, but the firms also stand to gain from greater gender diversity.
Even Capitol Hill can make some improvements. The US is among a small handful of countries including Papua New Guinea and Lesotho that don't guarantee paid maternity leave.
Looking at a list of maternity-leave benefits, "when you start to get to like country number 141 and you realize the US is still below that," it's weird, Zlotnicka said.