“The presence of women on boards of directors leads to better financial performance” news came from a report after another, highlighting a business statistics guaranteed to capture the imagination and prompt discussion.
What is the best way to encourage companies to focus on equality and diversity to make them think their bottom line?
In the UK, the 30% Club was established in 2010 with the goal of having women constitute at least 30% of members on each board.
In the USA, the Thirty Percent Coalition – a group of people who are the leaders and presidents of their companies was created to get the same thing.
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Of course, there are many other – and some say better reasons to support gender equality, but we wanted to analyze whether this widely accepted claim is true – not to have more women on the board really means that the company makes more money?
Scholars have warned against jumping to simple conclusions.
A report published by Credit Suisse last year, has said that companies with at least one woman director has received a better return on investment compared with companies with all-male representation.
They say companies where women accounted for at least 15% of senior management were 50% more profitable than those in which less than 10% of managers are women.
But the Prof Alice Eagly, Northwestern University, USA, says that many of the studies commissioned by the company, are “naive” as to not take into account other variables.
She explains that the more sophisticated analysis carried out by scholars have shown very little positive correlations between female members of the board of directors and financial success. But this is an average – in some companies the ratio is the neutral state, and in some it was negative.
And to prove the causal link is much more difficult. It is difficult to say that it is a question of having more women on boards, which allows companies to do better, rather than other factors – something corporate relations to recognize.
This is why companies with more women on boards are also different in other ways, according to Professor Eagly.
For example, the size of a firm seems to be one of the most significant factors in determining profitability. And larger companies are likely to hire a greater number of women at all levels.
More innovative firms are more likely to use their talent effectively, regardless of gender. And the companies that were already the most profitable may have been more able to focus efforts on diversity, ” he says.
The study of the gender composition of the top management of the US’s biggest corporations, not only their members of the board of directors, has found that female representation in top management improves firm performance, but only in companies “focused on innovation”.’Add women and stir’
And, curiously, female members of the board seems to have more of a positive impact on the performance of the company in countries where women have more equal rights and treatment global.
It seems that there is a relationship between more successful companies and those with more women in senior positions in general, but it is not enough to “add women and stir”, as Professor Robin Ely from Harvard Business School puts it.
Another study conducted by a group of germans, Dutch and Belgians, the researchers found, “the mere representation of women on boards of directors is not related to firm financial performance if other factors are not considered”. It is based on good corporate culture.
If the women are in the minority in an environment hostile to them, they are unlikely to be able to have a positive effect and that applies to other types of diversity too, the study suggests.
Focusing on the numbers, without addressing the structural diversity of problems is not enough, according to Professor Ely.
Looking at how many spaces on the board are occupied by women, does not tell you how influential the board is, and does not tell us if those women are being listened to and allowed to have an impact, Prof Ely, points out that “not all the points on a board are created equal”.
There is some evidence that having three women on a board of 12 to 15 people is the turning point for them to actually be heard and can have an influence. So there are good arguments for the 30% rule, but do not necessarily translate directly to profits.
In fact, Corinne Post, a professor of organization and management, says that the members of the board do not have a direct influence on the bottom line of a company, but they have a greater influence on the social responsibility of enterprises.
She found that there were five times as strong correlation between a company’s female members of the board of directors and stronger performance when it comes to ensuring that they are respectful of the environment as a company, or become involved in philanthropy, for example, that the correlation between female members of the board of directors and of the profits.
The profitability is very complex, and there is also evidence that executives might not have much influence on the profits of the company.
“In companies with any women on their board at all, usually have between one and three are really saying that the sex to three people on a board is going to have an impact on the bottom line?” Prof Ely asks.
For Northwestern Professor Eagly, more relevant, question is: why would there be need of evidence that women bring home more money than men, before they come to equal the state of the tabs.
“Why should you exclude the 50% of the population in important jobs. Is the social justice that is not useful.”
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