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EVIDENCE & SURVEY: WOMEN AND THE NEW BUSINESS LEADERSHIP | The all-male board does not work as well as the gender diverse board

The evidence is mounting
According to Peninah Thomson in her excellent book WOMEN AND THE NEW BUSINESS LEADERSHIP, a combination of words and actions is required to bring about the transformation of the average board from an all-male council prone to “groupthink” into a more diverse group whose deliberations are enriched by feminine perspectives and outlooks.
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The words, in the form of reports, studies and rankings, can leave all but the most incorrigible skeptic in little doubt that there is a strong, positive correlation between corporate performance and the number of women on company boards.

 

Roy Adler, professor at Pepperdine University in Malibu, conducted a 19-year study of 215 Fortune 500 companies (Women in the Executive Suite Correlate to High Profits). He found the 25 companies with the best record of promoting women to senior positions were 18–69 percent more profitable than the median companies in their industries.

A Conference Board study found clear links between women on boards and financial performance and the quality of corporate governance.

The analysis by Cristian Dezsõ, of the University of Maryland, and David Ross, of Columbia University Business School, of Standard & Poor’s ExecuComp data on the largest 1500 US companies, found a relationship between firm quality, as measured by Tobin’s ‘Q’ (market value divided by replacement value of assets) and female participation in senior management.

A study by Catalyst, the US non-profit, found that Fortune 500 companies with more women on their boards outperformed companies with fewer female directors. Companies with the highest representation of women outperformed those with the lowest on the three key measures of return on equity, return on sales and return on capital by 53 percent, 42 percent and 66 percent respectively.

McKinsey & Company, the leading strategy consultants, surveyed 101 large companies in Europe, America and Asia. They found companies with three or more women in senior management positions outperformed those with none on nine criteria, and that performance improved significantly when 30 percent or more of management committee members were women.

In a follow-up study with Amazone Euro Fund of the 89 listed European firms with the highest gender diversity in top management, McKinsey found these companies outperformed their sector peers on return on equity.

A report by Ernst & Young, one of the “big four” accountancy firms, summarized this research, and several other studies revealing the vast, still largely untapped, potential for business represented by the under-representation of women at all levels.

The report’s authors concluded: “At a time when our global economy is facing its greatest challenge in decades, we have to capitalize on the contributions women can make. … The learning that comes from a crisis is a terrible thing to waste.”

Professor Alex Haslam and his team at the University of Exeter also found that companies with one or more female directors performed better those with all-male boards on return on assets and return on equity, and were much better investments in the long run.

So why is so little being done?

A global survey by McKinsey & Company, conducted between August 31 and September 10 2010, found that the percentage of executives who believed gender diversity in leadership links to better financial performance has risen.
The survey also found that companies are still doing little to act on that belief. At most companies surveyed, gender diversity wasn’t a high priority, and gender-diversity policies varied widely. But these priorities and policies work. At respondent companies where gender diversity is a relatively high priority, and where policies promoting gender diversity are relatively numerous, executives say that company leadership is more diverse. Between respondents who said gender diversity was among the
top-three agenda items and all respondents, there was a 32 percentage point difference between the proportion who reported that women filled more than 15 percent of the C-level positions.

Supportive CEOs and other top managers also affect the performance on diversity, but the survey found that few top management teams monitor gender-diversity programs. The three programs most often cited by respondents were flexible working conditions, support for reconciling work and family life, and programs to encourage female networking. The most effective policies among companies with more than 15 percent of women at C-level were program-monitoring by the CEO, skill-building programs designed specifically for women, and encouraging or requiring the company’s senior executives to become mentors of junior women.

The survey found that the variable that had the most impact on the gender diversity outcome was the interest shown by the CEO and top management in the progress of gender diversity programs. Only 18 percent of respondents said their companies’ CEOs and top executive teams were seen to be monitoring gender-diversity programs, despite the fact that nearly half (more than for any other tactical variable) thought that visible C-level monitoring was the most effective way to increase gender diversity
in general.

Twice as many women as men said a low level of C-level commitment was one of the key barriers to achieving gender diversity, but the single most frequently cited barrier was a lack of awareness of or concern about gender diversity as an important issue. Only 7 percent of respondents said their companies had had difficulty implementing a top-management monitoring policy. Of respondents whose companies had implemented such monitoring in the past five years, 65 percent (the highest percentage for any executive measure) said the measure had had a positive impact on gender diversity.

The visible commitment to gender diversity of the top executive team is needed to achieve a significant improvement.

Most C-level executives are well aware of this. Almost half of the survey’s C-level male respondents and 60 percent of the C-level female respondents acknowledged that visible monitoring by top executives had the most impact on increasing gender diversity.

About Dr. Ev D'aMigo; PhD

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