Insolvency Practitioners, KSA Group Limited, who run the website www.companyrescue.co.uk, has found that companies with mixed boards are less likely to become insolvent than those with all male boards and all female boards. KSA looked at the insolvency rate of the UKs 1.5m companies, with 2 or more directors in the last 12 months to June 2019.
- The insolvency rate is 49% higher in all male boards than mixed boards
- The insolvency rate is 32% higher in all male boards when compared to all female boards
The insolvency rate for male-dominated boards was 0.63%, for female boards it was 0.48% and for mixed boards it was 0.43%. These rates suggest that mixed boards are more likely to avoid insolvency than either all male or all female run companies.
These findings are supported by a recent study by Morgan Stanley. They found that firms who have a more gender equal board, have outperformed their less diverse peers by 2.8% per annum, in the last eight years. https://www.morganstanley.com/access/gender-diversity.
Types of Insolvency
Looking at the actual companies that have fallen into insolvency, administrations only accounted for 10% of insolvencies. This reflects the fact that administrations are more suitable for larger businesses. Interestingly, only 9 female-run companies used this tool, compared to 452 male-run companies. It is most likely that this is due the fact that there are very few large all female run companies.
Break down by Industry Sector
A break down by industry sector of the companies shows there is not a large difference in the industry sectors between the different board types. It appears that all male boards are more common in the construction industry, which does have a higher overall insolvency rate, yet it is not high enough to demonstrate that it is the male dominated construction companies becoming insolvent that are responsible for the overall discrepancy. Mixed boards are more common in the administration and services sector, which also has a high insolvency rate.
Administrations by Sector in 2018
All Male Board Insolvencies By Industry Sector
Mixed Boards Insolvency Rate By Industry Sector
All Female Gender Boards Insolvency Rate by Industry Sector
Further analysis highlighted that 25% of all insolvencies occurred in the London area. It is interesting that a higher proportion of women run businesses that became insolvent, were based in London.
Robert Moore, Marketing Manager for KSA Group, said; “This is the second year that we have researched the role of gender in the insolvency rates of SMEs. Last year we found that female dominated boards had a lower insolvency rate than male dominated boards. This year we looked at the role of gender diversity and found that mixed boards had lower insolvency rates than both all male and all female boards. Whilst it is not possible to prove that women are better at running businesses than men, the body of evidence is growing that companies that have women on the board do reap benefits in terms of increased profitability and less failure. “