Here's an investment strategy to consider: Invest in companies with the highest percentage of female board directors.
Research in the U.S. and Europe suggests that companies with female directors have better valuations than companies with no female directors.
The research might be one reason more investment managers such as BlackRock, the world's largest money manager, are starting to exercise their proxy voting rights to push for more women on corporate boards. Evidence shows it improves corporate performance.
For example, a 2012 Credit Suisse AG report found that companies with female directors outperformed those with no female directors in return-on- equity and price-to-book-value multiples. Studies by Catalyst and McKinsey & Co. confirmed the outperformance of companies with women on the board relative to companies with none.
Obviously, the performance will equal out when most companies have female directors on their boards, but that is a long way off, given that women hold only 17% of the Fortune 500 board seats.
The outperformance might also disappear if the government were to mandate that a certain percentage of directors have to be women. That is what happened when the Norwegian government mandated that 40% of board seats be held by women.
One study found that the higher valuation of companies with female directors before the Norwegian mandate turned negative after the government mandate. In addition, many Norwegian public companies went private after the mandate.
The message is that investors should take advantage of the apparent outperformance of stocks with women on the board of directors, and their advisers in their push to get more companies to appoint women to their boards. Judging by the evidence, adding women to all boards would improve U.S. corporate performance overall. And we don't need or want the government setting mandates.