E.l.f. Beauty underscores importance of board diversity in publicly traded companies
E.l.f. Beauty is continuing to highlight the positive effect boardroom diversity has on a company with a new report created in partnership with the North Carolina Agricultural and Technical State University.
The “Not-So-White Paper,” which is part of the beauty brand’s Change the Board Game initiative, looks at how board diversity can positively impact the success of publicly traded companies in the United States.
“Today, more than ever, diversity is essential for strong corporate governance,” said Tarang Amin, chairman and CEO, e.l.f. Beauty. “The research draws real-world correlations that diverse boards are better equipped to navigate complex business environments, foster innovation and deliver value to shareholders. Our own intentional and ongoing journey led us to a Board of Directors that is 78% women and 44% diverse. This stewardship gives us the opportunity to be an agent of positive change.”
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According to the study, above-average gender diversity on the corporate boards of S&P 500 companies saw a 15% return on equity and a 50% reduction in earnings risk. Also, women on boards correlated with better price-to-earnings ratios, and boards with three or more women or minorities had a lower likelihood of large-scale discrimination lawsuits.
“Over a decade of research from the commercial sector and academia shows convincingly that diversity in the boardroom can have several positive benefits for a company, including higher return on equity, reduced financial risk, better returns for shareholders and fewer lawsuits,” according to the report. “However, these benefits are not automatic, and they are most likely to occur when there are at least three members of underrepresented communities on a Board of Directors. This should make sense to board members from their lived experience, as one voice can put an issue on the radar and a second voice can validate it, but it often takes at least three to make a quorum that can change policy.”
The “Not-So-White Paper” includes three unique sections:
- A review of existing studies yielding evidence that board diversity – on both gender and racial/ethnic lines – positively impacts performance and helps reduce financial and legal risk for companies across sectors, and of varying sizes.
- The Change the Board Game Database was created and includes the racial and gender representation of more than 4,000 U.S.-based, publicly traded companies listed on the NYSE and NASDAQ.
- An initial analysis of the new data set was conducted, which ranked boards by gender and racial/ethnic diversity, identified the makeup of the “average board” in terms of representation, and correlated increased diversity to improved performance.
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“The findings underscore that a Board of Directors reflecting a wide range of perspectives, experiences and backgrounds is a critical factor for achieving competitive advantage and sustainable growth,” said Elimelda Moige Ongeri, Ph.D., Hairston College Dean. “More importantly, the goals of the Change the Board Game project align well with N.C. A&T’s legacy of being at the forefront of advancing social justice and equity. N.C. A&T is proud to engage multidisciplinary researchers on this project, as this provides a more comprehensive analysis and contextualizes the data.”
The “Not-So-White Paper” is available to view online.
