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Want more women on your board? Offer better paternity leave

February 19, 2016
Diversity & Inclusion

Despite women at the helm of some of the world’s most powerful companies – including General Motors, IBM and PepsiCo – they remain a rare presence in the upper echelons of business even in the most progressive countries. While many studies have linked higher stock values and profits to more women in management or on boards, debates over the benefits of promoting more women continue.

A new study, released today by the Peterson Institute for International Economics and EY, which looks at nearly 22,000 public firms in 91 countries, is the latest to make a strong business case for putting women in charge.

Here are some highlights from the report.

Less than 5% of firms have a female CEO
Nearly two-thirds of the firms had no women serving on their boards, and just over half had no female senior executives. Female CEOs are also rare: less than 5% of firms had a woman in the top position.

While companies could cite a lack of highly educated women as a reason decades ago, they can’t anymore. The number of women attending college has grown nearly twice as much as the number of men since 1970, and young adult women are 21% more likely than men to be college graduates.

The report also pointed out that difference between the number of male and female employees is low, weakening the argument that there aren’t enough women in the workplace to be groomed and chosen for management.

More maternity leave doesn’t lead to more female leaders
Countries that reported more gender equality had 11 times more paternity leave days than the bottom countries. Finland, for example, which was placed fourth on the list, offered fathers 54 days of paternity leave, while Japan, which was bottom of the list, provided fathers with no days off. Countries that offer fathers more leave have more women on corporate boards.

However, countries that offered maternity leave did not have a greater number of female leaders, a surprising finding according to the authors. For instance, Latvia, which comes in second on the list, provided mothers with 16 weeks of leave, but so did Austria, which came in third to last. This result, wrote the authors, “suggests that policies that place a disproportionate burden of childcare for women is one barrier to female corporate advancement”.

Women executives are good for business
A firm with 30% women in senior roles could see a six percentage-point increase in net margin, or the ratio of net profit to revenue, compared to a similar company with no female leaders.

Women tend to bring with them a different mix of skills and expertise, said study co-author Marcus Noland, executive vice president and director of studies at the Peterson Institute. “Increasing the share of women in corporate leadership can contribute to firm performance by increasing skill diversity within top management,” he said. “The results suggest that gender-biased firms are paying for their bigotry on the bottom line.”

The presence of a female CEO had no noticeable effect on a company’s profits. While that means companies led by women executives didn’t clearly outperform those headed by men, companies with more women in senior executive roles “demonstrated repeatedly” a boost in profits.

“This pattern underscores the importance of the pipeline for female managers and not simply getting lone women to the top,” wrote the authors of the report.

Just 2% of Japanese firms have women on the board
Some countries have made more progress than others in promoting women at work. Norway topped the list with the most female directors. Of the 132 firms surveyed, 40% reported having women on their boards. The Nordic country has consistently earned kudos for being a leader in promoting gender equality, and both its prime minister and finance minister are female. Norway, along with other European countries on the list including Italy, Finland, Spain, Iceland and France, has put in place policies to ensure more women serve on boards, while other countries, like Canada and Brazil, are working to pass similar mandates.

Japan landed at the bottom of the list, with just 2% of firms with women on boards, and 2% in executive positions. Mexico didn’t fare much better, with just 4% of firms reporting women on their boards. In Japan, the country’s long working hours means many women choose not to return to work after having children. This may soon change – Prime Minister Shinzo Abe has committed to increasing the rate of women in leadership positions to 30% by 2020.

Women advance faster and higher in finance, healthcare and telecommunications
Women advance faster – and higher – if they’re working in finance, healthcare, utility and telecommunications, with 16%-18% in senior executive positions, and 12%-14% as directors.

Fewer women leaders appear in traditionally male dominated industries like basic materials, technology, energy and industrial sectors, where women account for 10%-12% of the executive staff, and 8%-10% of the directors.

By Alison Moodie

Source: The Guardian

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