Women in Boardrooms Deliver Better Performance

By Frank-Jürgen Richter

May 10, 2021

We keep hearing how vital the contribution of women participation is, be it in the field of business or public governance. But the reality on ground is far-fetched.

MSCI ESG research provides an interesting study of scenarios to reach 30 percent women directors on publicly traded companies globally.

We are also increasingly witnessing women making their voices heard, be it the instance of the #MeToo movement around the world or the case of Malala Yousafzai – a Pakistani activist, fighting for the right to female education around the world.

Change is happening, albeit at a slow pace.

To address such issues, Horasis is organizing the Horasis Global Meeting on 08 June 2021. The virtual event will see participation spanning members from governments, businesses, academia, and the media to deliberate and discuss matters of women participation in boards to improve businesses and societies.

Traits of a Diverse Corporate Boardroom

A typical diverse boardroom should have a 50-50 representation of both genders. And should give accessibility and the necessary tools for all to cast their opinions and votes in every matter of the company’s operations.

Additionally, diversity has not just been restricted to increased women participation, but has also spread to other aspects such as color, race, and creed. In many instances, we see that boards usually like to have people of a certain type or background. This is an understanding that stems from the belief that similar views and opinions brings stability to board decisions and there are fewer instances of discrepancies. Difference of opinions and variety in ideas, more likely than not, result in better decisions. This has been proven repeatedly across studies.

In the core of a diverse boardroom, lies the desire to explore the new and the trait of transparency. Directors of the boardroom should possess these traits for companies to find success in their decisions. Lack in transparency is often the major cause of boardroom discrepancies, leading to divided opinions and fallout.

Moreover, it is equally vital that companies ensure they make sufficient tools and resources available for women to navigate through the organizational ladder to enter into management positions.

Diversity Results in Increased Revenues

Although the demand for increased participation by women in leadership roles is not recent, its importance has risen now and its impacts on business cannot be denied.

Below are few of the studies conducted around the world that clearly indicate diversity in boardrooms led to better business profits and higher return on investment:

  • In 2019, a study conducted by Credit Suisse, among 30,000 senior executives from over 3,000 companies across the world found that, “companies in which women held 20 percent or more management roles generated 2.04 percent higher cash flow returns on investment than companies with 15 percent or less women in management roles”.
  • In another global survey of 1,000 companies by McKinsey & Company, it was found that companies with gender-diverse boards were 28 percent more likely to witness a higher EBIT (earnings before interest and taxes) than non-gender corporate boards.
  • A study by the Kellogg School of Management found that between 2014 to 2018, gender-diverse announcements by 49 technology companies led to an average 0.1 percentage point increase in their stock prices.

The Case for More Women on Boards

Increased revenues; better cash flow returns on investment; attracting higher rates of investments deals; and increased market valuation are some of the immediate benefits that companies can reap from a gender-diverse boardroom.

Additionally, diversity in boardrooms leads to increased innovation and better profit margins. In a 2017 survey by the Boston Consulting Group, it was found that, “higher levels of diversity in management positions contribute to increased ‘innovation revenue’ (income generated from new products and services)”.

Such evidences should be sufficient for increased participation of women in leadership roles. But sadly, this is not the ground reality. Resistance remains. Even in the best performing economy, which is France, representation of women on board averages around 43.6 percent against 56.4 percent of representation by men. This average slides to its lowest in countries such as Brazil (12.2 percent), Russia (12.4 percent), Hong Kong (13 percent), and Japan (14 percent).

The concept of the glass ceiling is slowly being broken and we are increasingly seeing instances of women taking up leadership roles such as Mary Barra, CEO of General Motors, the first woman to head a major automobile manufacturing company; and Ginni Rometty, ex-CEO and current executive chairman of IBM and the company’s first female chief in its 108-year history. These are just a few among several examples.

Diversity is Imperative

Developments around the world are increasingly pointing towards more women on board in the future. This trend will not die down soon. And rightfully so, due to its evident benefits that are manifold.

Customers are also demanding corporates to become more inclusive and sustainable. And this demand has further heightened with the pandemic. It is imperative for companies to not overlook the benefits of a gender-diverse boardroom.

We need more women in leadership. The sooner, the better.

Photo Caption: Diverse boardrooms have proven to deliver better results.