The Case for Women in the Boardroom
Top 4 accounting KPMG recently announced a woman, Lynne Doughtie as the Chief Executive Officer. This follows Deloitte who named Cathy Engelbert as the CEO earlier this year. Does this signal a growing awareness of the benefits of having women in the highest positions in corporations or is this just the action of a few outlier firms.
Research has proven that there is a strong business case for having women on boards. For example, the Credit Suisse Research Institute found out from a study of over 3,000 companies that businesses with at least one woman on board outperformed those without any woman by about 5%.
Some of the advantages that women bring to the board include bringing diverse perspectives to business decision-making; adding unique management and governance qualities to an organization, which can improve financial performance; Improving a firm’s image and reputation for diversity; and enhancing a firm’s capacity to recruit/retain female talent. Some of the advantages of women participation in boards are amplified in some specific industries For example, consumer-oriented companies gain from placing females in decision-making positions, because women tend to control household purchases, and other women understand better what appeals to them.
A reason for better performance of women inclusive boards may be that because the bar is set higher for women, those that make it to they top are extremely good or that there are some distinctly female characteristics such as empathy that increase a board’s relational quotient and improves decision making.
The issue of women on boards has sparked policy debates as to whether there ought to be quotas reserved for female participation on boards as is the case in some countries in Europe. This has been push backed by even female executives who do not want to be seen as a token. Instead of a quota system, Credit Suisse urges companies to take all the steps they can to ensure women have every opportunity to progress through their organizations – from introducing family-friendly working practices for all staff to ensuring that men and women receive equal pay.
This is not a call for firms to rush out to ensure that the next board hire is a woman. Research shows that women on boards become very effective when three or more women serve on a board together. According to the researchers “ Suddenly having women in the room becomes a normal state of affairs. No longer does any one woman represent the “woman’s point of view,” because the women express different views and often disagree with each other. Women start being treated as individuals with different personalities, styles, and interests. Women’s tendencies to be more collaborative but also to be more active in asking questions and raising different issues start to become the boardroom norm. We find that having three or more women on a board can create a critical mass where women are no longer seen as outsiders and are able to influence the content and process of board discussions more substantially”
Companies who desire to have more women on their boards need to do the following; adopt formal board policies on diversity, increase the number of women in the leadership pipeline, ensure leadership commitment and f recruit beyond traditional business and social networks to identify talented women who may be from non-profit organizations, academics or the public sector.
