Getting more women into the corporate boardroom has been a high priority governance issue for several years globally.
While there has been progress, has it been enough?
According to data from MyLogiq, 30% of corporate directors are female for the companies in the Dow 30, while only 23% are female for companies in the Russell 3000 index.
Deloitte reports that women only hold 16.9% of board seats globally even though between 2008 and 2015, 32 countries enacted some type of boardroom gender quota.
As a macro benchmark, the World Bank estimated that 50.52% of America’s population and 49.58% of the global population was female in 2018. Deloitte’s research reports that Norway and France come closest to these percentages, with female directors comprising 41% and 37% of the boardroom.
What impact do female directors have in the boardroom when compared to their male counterparts? If males and females both bring the same skills and experiences, the case for gender diversity in the boardroom is weak, so there must be more to it. Research is starting to show that there’s a lot more to it.
Corporations and governments are the two primary types of organizing bodies that fulfill the needs of almost 8 billion people globally. The leadership of each of these types of organizing bodies directly impacts how they fulfill their purpose.
Corporate leadership directly impacts both firm and increasingly social outcomes. Corporations in America have taken a leading role in America’s response to the pandemic given the federal government’s failures. This week, corporations are stepping up to hate speech on social media platforms by voting with their wallets as they pull their advertising dollars from Facebook and others.
The pandemic has created a corporate and social leadership challenge unlike any other. Out of necessity, the role of the corporation in leading through and beyond the pandemic is starting to shift. Social issues are accelerating their integration into corporate value propositions far beyond just profit and loss.
So why does gender diversity in the boardroom matter? Research has shown that diversity in general matters because it brings a broad collection of experiences, perspectives, backgrounds, and viewpoints that lead to better decision making. Optimizing boardroom decision making is a critical goal for every organization in a highly complex and risky world.
New academic research is identifying the intrinsic benefits that gender diversity adds to the complex responsibilities of the boardroom.
Corporate directors need to be able to understand the markets their companies serve, their employees, and the complex issues that face their businesses. At a superficial level, when half the planet is female, this is an obvious benefit to gender diversity. But there’s more.
A recent paper1 published by Professor Marc Goergen of IE Business School in Spain has identified a direct connection between corporate boards with a high concentration of female directors and a firm’s greater renewable energy consumption. Women on boards would seem to be a good thing for planetary health.
He has also released research indicating that a female presence on the board can curb excessive risk-taking by men, by tempering the overconfidence of males.
In a world filled with complex risk as we’re all experiencing first-hand, that can’t hurt.
Other research in 2014 indicated that more gender-diverse boards in the S&P 1500 were associated with less M&A initiation activity and lower price premiums, i.e., a sign of risk-aversion. Given most M&A activity fails miserably to live up to expectations, that sounds like an excellent outcome for shareholders and stakeholders.
Women have also been shown to be more caring and ethically sensitive, helping corporate social responsibility initiatives. Research also shows that female directors have better boardroom meeting attendance, which has a spillover effect on their male counterparts as well.
Research also indicates that companies with female directors improve firm reputation, decrease the incidence of corporate fraud, improve earnings quality, decrease corporate tax aggressiveness, are less likely to downsize their workforce, and their firms have a more significant philanthropic response to victims of natural disasters.
There is also a critical mass element in play across some of these indications. That is, having a single female director on the board has less of an impact than multiple female directors.
The intrinsic values and perspectives that women can bring to boardroom leadership environments are needed now more ever. The data backs up their lack of participation in the boardroom globally.
The world needs to reboot post-COVID, and so does the corporate boardroom. Gender diversity is the most foundational boardroom diversity leadership issue. Other boardroom diversity issues, including cognitive ones, can also be addressed concurrently, such as the lack of boardroom digital and cybersecurity competencies. Adding female technology leaders to the boardroom solves multiple leadership challenges that most boards are struggling with.
The world that men have created isn’t exactly firing on all cylinders. It needs a lot of help—starting with a lot more female leadership in the corporate boardroom.
The future can’t wait.