Net Net: Promoting innovation and managing change
Net Net: Promoting innovation and managing change

LGBT companies are beating the stock market

Deutsche Bank stops North Carolina expansion over anti-gay law

The stocks of companies that have women as board directors or lesbian, gay, bi-sexual and transgender employees in senior roles outperform the ones that do not, according to a recent report.

It's the new portfolio diversification, Credit Suisse, the report's publisher, is arguing.

The bank took 270 companies with openly LGBT staff as leaders or senior managers and compared their performance to a stock index tracking North America, Europe and Australia, because most of the LGBT companies Credit Suisse could identify were in one of these three regions.

"Having the policies is not enough," said Stefano Natella, Credit Suisse's global head of research, who co-wrote the report. "You have to want the culture."

The report compared Credit Suisse's LGBT basket to the MSCI ACWI, an index that covers a similar geographic as the bank's diversity portfolio. Credit Suisse found that the LGBT index outperformed the MSCI AWCI by 3 percent annually since 2010.

Nearly 60 percent of the LGBT index Credit Suisse tracked come from one of three sectors: information technology, financials and consumer staples. There are far more than 270 companies with LGBT executives, of course. But, according to the report, most of them have not come out publicly.

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"Only 4 percent of the workforce identifies itself as being LGBT," the Credit Suisse report said, adding "41 percent of U.S. LGBT workers and 72 percent of senior LGBT executives say they have not come out openly at work."

Women, too, help make a difference in companies' stock performance. Credit Suisse found that companies with at least one female director delivered "an excess share price [compound annual growth rate] of 3.4 percent over the last 10 years compared to all male boards."

"We also found that companies with more than 15 percent women in senior management positions outperformed those where women accounted for less than 10 percent," the report said. "We find that the share prices of companies that have at least one female director outperform those with no female representation."

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Natella said it's likely the index will grow over time, and not just because more executives will come out of the closet. It's more likely that startups that could be nearing an IPO have LGBT staff he said. Still, the corporate universe has a long way to go.

"Tim Cook at Apple is the only openly gay CEO," the report said.