Good corporate governance supported by women on Boards: Moody’s

Moody’s Investors Service, a global credit ratings agency, notes that companies in advanced economies show a link between Board gender diversity and credit ratings, while those in emerging markets do not.

In investment-grade companies (rated Baa and above), women hold about 29% of Board seats, up from last year, and 24% in speculative-grade companies (rated Ba and below), according to Moody’s latest report. Having women on Boards, and the diverse perspectives they bring supports good corporate governance, which is positive for credit quality. However, the data doesn’t prove a direct cause-and-effect relationship between gender diversity and credit quality.

Moody’s analysis of North American Boards also finds that higher credit ratings are associated with greater racial and ethnic diversity. Investment-grade companies in North America have more women from minority racial and ethnic groups on their Boards compared to speculative-grade companies.

In Europe, 35% of Board seats are held by women, up by 2% from the previous year. North American companies closely follow, with female representation on Boards rising to 30%. However, women hold less than 20% of Board seats in Latin America, the Middle East, Africa, and Asia-Pacific.

Service-oriented companies, such as those in insurance, retail, healthcare, and utilities, tend to have more diverse Boards, with women holding nearly one-third of Board seats. This pattern is mostly seen in Europe and North America.

Additionally, Moody’s reports that companies with positive governance characteristics have an average of 34% women on their Boards, up from 31% in the previous year. Conversely, companies with negative exposure to governance issues have seen a decline in the percentage of women on their Boards during the same period.