02/16/2012 | by Carisa Chappell

The idea that businesses benefit from diversity in their workforce is nothing novel. However, new research suggests that for REITs, gender diversity on their corporate boards can have pronounced advantages.

Ferguson Partners Ltd., a global executive recruiting consultant, and FPL Associates, a management/executive corporation consultancy, analyzed the relationship between REITs' performance and a wide range of characteristics related to their boards of directors. The results of the study indicate that companies that have had a female board member for at least three years or more tend to experience higher total shareholder returns than those that have not.

In addition to gender, the study looked at factors such as board size, frequency of meetings and compensation levels.

"When we first started the research, we looked at a really broad range of factors and variables of what might drive enterprise performance," said Jonas Bordo, a senior director with FPL Associates who co-wrote the report with colleague Loren Croskey. "The main factor that came back with a strong correlation to performance was gender."

The study found that of the approximately 160 REITs analyzed, those that have had a female on their board for more than three years tended to produce annual total shareholder return growth rates that were 2.6 percentage points higher than their peers during the three-year period, 3.6 percentage points higher over a five-year time period and 3.4 percentage points higher in the course of 10 years.

While the underlying cause or causes is open to interpretation, the authors noted that some may argue that the addition of a female perspective in board activities lends a valuable contrast to that of male counterparts. They say it may be that varied perspective that ultimately results in better performance.

"Diversity brings a questioning of the norms, that is so important to building a successful, long term business," according to William Ferguson, chairman and CEO of Ferguson Partners Ltd.

Bordo said broader research has shown evidence that a female presence on a board of directors can have a positive effect on the company's performance. Still, he said he was surprised at the strength of the correlation among REITs.

Ferguson noted that there was no variability in the results by sector. The findings among all sectors of the REIT industry, such as retail, hospitality and multifamily, were consistent. The trend also holds true for small cap REITs as well as large cap REITs.

The report pointed out that 44 percent of REITs have no female representation on their boards of directors, which Ferguson said is "unacceptably high." He noted that 88 percent of Fortune 500 companies' boards have at least one female member. Among large cap REITs, approximately 40 percent lacked a female director with at least three years of tenure, he said.

"The real estate industry is not as progressive as other industries regarding the whole issue of diversity," he said. "If a company is going to encourage diversity, you have to start at the board level and drive it through senior management. If your customer base and employee population are diverse, it is counterintuitive not to have diversity on the board."