INVESTORS need to do their part to get companies to diversify their boards in the light of a new report that shows that firms with a range of directors generate better returns, according to the Minister in the Prime Minister's Office.

Ms Grace Fu said at the launch of the Singapore Board Diversity Report last night: "I would also like to urge investors, particularly large institutional investors, to ask companies pointed questions about their board diversity.

"After all, it makes good business sense for potential investors to query companies about the rigour of their board nomination and selection process."

Ms Fu pointed out that women have not been able to break the glass ceiling in boardrooms despite progress in other fields.

Only 8.3 per cent of the directors of Singapore-listed firms last year were women, up from 7.9 per cent in 2012, according to the report.

That is a far cry from the 52 per cent of female state court judges, 63 per cent of principals and 23 per cent of MPs.

Ms Fu said companies must be encouraged to improve their board diversity by going beyond personal networks in recruiting board members.

And there are good reasons to do so. The report found that companies with male and female directors, with at least two from different ethnic groups and members from two different generations, do better.

Such companies generate an average gain of 5.1 per cent in their return on assets (ROA), compared with 1.1 per cent at firms that did not display any of the diversity indicators.

In addition, of the 43.8 per cent of firms with at least one female director in the boardroom, their ROA was 3.3 per cent, compared with 0.3 per cent at firms with all-male boardrooms.

The report also found that boardrooms with members from multiple generations and different ethnicities also fared better than those without. It rated age diversity if the difference between the oldest and youngest director was more than 20 years.

The study - which examined ethnic and age diversity for the first time - looked at 676 listed companies here that issued annual reports last year.

It is published annually by the National University of Singapore Business School's Centre for Governance, Institutions and Organisations, and BoardAgender, an initiative of the Singapore Council of Women's Organisations.