Diversity – Still Unwelcome In The Corridors Of Power

By on January 14, 2014
business_lady

Opinion: Statistics consistently show that women outperform men, so why are companies still afraid to put them on the board?

We ended 2013 with some good and not so good news regarding diversity on company boards. 

The German coalition government announced a 30% female quota on DAX company supervisory boards (up 8% from the current level). 

But in the US, non-profit research firm Catalyst found that female representation on Fortune 500 company boards remained below 17% for the fourth year running. 

In the UK, Lord Davies was the man entrusted with producing a non-regulatory solution to increasing women’s representation on company boards, and in May last year he produced an upbeat report on his initiatives.

‘Overall the progress has been good’, he noted, with women accounting for 17.3% of FTSE 250 board directors. 

However, a closer look at the figures revealed that women hold just 6.1% of executive directorships (up from 5.5% in 2010). This translates to just 18 female FTSE 100 executive directors, compared to 292 males. 

Back in Europe, data published by the European Commission shows that 85% of non-executive board members and 91.1% of executive board members are men – in other words women made up just 15% of non-executive directors and a tiny 8.9% of executive directors.  Since it is only the executive board members who rise up through the ranks, the low figure for women executive directors tells a story of woeful talent management. 

Norway led the way on quotas in 2003 and the profile of women directors shows them to be better educated, on average, than their male counterparts. As Jan Akser, managing director of the Financial Services Association has said: “Gender quotas are the best thing that has happened for Norway’s global competitiveness”. 

However, this perception may not be widespread since the number of women in senior management positions in Norway since the enforcement of the quota in 2008 has only risen from 15% to 18%, and there is still no female chief executive of a major Norwegian company.

Svein Rennemo, the Chair of global giant Norwegian Statoil, has said that people tend to over-play the challenges of a quota system and under-estimate the benefits from directors who are more educated and able to offer different experiences.

Statistics show women outperform men

The Credit Suisse Research Institute examined the performance of 2,360 global companies between 2005 and 2011. It found that the shares of large companies with women board members outperformed those with all-male boards by 26%, particularly in the post-2008 period.

The study drew on other research to propose a causal link with women’s greater risk aversion; people-focused skills; focus on communications and greater customer perspective.

A second study, this time by McKinsey, compared the performance of 101 companies in Europe, the US and Asia and found an enhancement over 2005-2007 of 17% in the share price of those companies with three or more women on their boards.

In a follow-up ‘Women Matter’ report, McKinsey attributed the improved performance to the fact that a greater proportion of women than men have a higher number of the transformational leadership attributes that lead to success.

Finally, a new study, soon to be published in the ‘Journal of Corporate Finance’,
highlights that organisations with more women on their corporate boards pay less on average for their acquisitions.

The authors, Prof Kai Li and financial experts from the Sauder School of Business at the University of British Columbia, found that for every female board member, 7.6% fewer takeover bids were targeted, with the cost of each successful acquisition reduced by more than 15%.

Business prosperity and competitive advantage lies in understanding the workings of unconscious bias. This takes humility but the advantaged for the business will more than repay the effort. Successful board management is like a game of football, not synchronous swimming and so having an array of talent is the key to success.

Ultimately, therefore, the issue of women on boards is not about gender but about competences and talents.

– Benja Stig Fagerland is an international speaker and advisor on diversity. She helped launch The Confederation of Norwegian Enterprise’s (NHO) “Female Future – Mobilizing Talents” programme.

– Gloria Moss is Professor of Management and Marketing at Buckinghamshire New University and Visiting Professor at ESG, Paris. She is author of ‘Gender, Design and Marketing’ (2009), amongst other titles

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