Sector News

2 things we’re not discussing in the women-on-boards conversation — but should be

January 16, 2015
Diversity & Inclusion
When Catalyst released its latest numbers about women serving on corporate boards this week, it got the conversation going again. Now we want to take it to the next level.
 
When Catalyst released its latest numbers about women serving on corporate boards this week, it got the conversation going again. Now we want to take it to the next level.
 
On Tuesday, I spoke with Corinne Post, a professor at Lehigh University, who began researching women on boards a couple of years ago.
 
And with the help of Kris Byron of Syracuse University, she completed what’s called a “meta-analysis.” Rather than do research on a single group of people — which can lead to imprecise results — she decided to combine the results of more than 140 studies on the effect of women on corporate boards around the globe.
 
The studies spanned from 1989 to 2014 and looked at more than 90,000 companies from 35 countries on five continents.
 
And the combined research yielded some fascinating results, many of which haven’t played much of a role in the discussion so far. Here are two:
 
1. Having women on corporate boards doesn’t unilaterally improve financial performance. Another key factor has to be in place.
 
Now, stick with me here because this is interesting. Some studies don’t consider this because their sample size only includes U.S.-based companies or the Fortune 500: Having women on boards impacts a company’s market performance only if the company is based in a country with a high degree of gender equality, Post says.
 
WHY: Here’s where the question of quotas comes in. Does a quota alone ensure that the women’s voices are heard? Well, if the company is in a country where gender inequality runs rampant, just because a woman is speaking doesn’t mean the other board members are listening.
 
And if they’re not listening, then the minority on the board often loses confidence, speaks less and, ultimately, is less likely to try to make waves, Post says. Then you’ve got a minority with a seat at the table but not a voice. On the other hand, when gender parity is stronger, boards are more likely to seek out and consider “the cognitive frames of the women in their midst,” the study says.
 
Women’s voices on the board are perceived as more legitimate and their suggestions carry more weight. Their impact is greater. And there’s a stronger relationship between the women’s roles and the company’s financial performance.
 
2. Women on boards have more of a positive impact in countries with stronger shareholder protections.
 
First, this finding does not mean that monitoring equals higher financial performance. Post was quick to point that out. But here’s what it does say: Women often play a larger role when there is more monitoring involved.
 
According to the research, countries with the lowest shareholder protections (the Netherlands and Germany, for example) saw the weakest relationship between women and higher accounting returns.
 
Countries with the highest shareholder protections, such as Malaysia and Israel, saw a more positive relationship between women on boards and accounting returns.
 
WHY: If shareholders have more power — for example, a board of directors could be held liable for their decisions or sued for director misconduct — there’s a good chance decisions won’t be made as hastily. That could give the minority (usually women) more opportunity to voice their opinions.
 
And the louder those voices are, the more boards may process decisions differently.
 
“Women tend to be more inclusive in conversations,” Post says. “They tend to ask more questions, tend to put people at ease, can be more egalitarian.”
 
And if that leads to better decision-making and, in turn, better financials? Well then resolving the gender gap on boards should be an increasingly compelling — and easy — commitment to make.
 
By Caroline McMillan Portillo
 
Spource: Bizwomen

Related News

September 18, 2020

If you want to be more diverse and inclusive, you need to start with this

Diversity & Inclusion

It’s more clear than ever that putting diversity and inclusion at the heart of an organization strengthens it at every level. Diversity has been conclusively shown to promote innovation, drive higher revenue, […]

September 11, 2020

How To Deploy Training Effectively To Improve Diversity And Inclusion

Diversity & Inclusion

So you need diversity training? That’s great, but consider this. How will diversity and inclusion training impact your organization, if you do not have the systems in place to make diversity […]

September 2, 2020

How to build a race-conscious equity, diversity, and inclusion strategy

Diversity & Inclusion

When I joined venture capital firm GV in January as the firm’s first diversity and inclusion partner, I was excited by the opportunity to help with one of the industry’s […]