Gender diversity is good for business. A global study by the Petersen Institute/EY across 22,000 publicly traded companies and 91 countries confirms that adding women to the corporate boardroom and the C-suite increases profits. A company which transitions from having no women to a 30% share of women “is associated with a one-percentage point increase in net margin – which translates to a 15% increase in profitability for a typical firm.”
Transitioning from no women to a 30% share of women increases profits by 15%.
According to Credit Suisse, companies with women on their board have outperformed those with only men by 3.5% on a compound annual basis since 2005. They’ve also shown better sales growth, higher cash flow returns on investment, and less leverage.
“ As female participation increased in senior management, so did performance, providing more quantitative evidence of the enhanced decision-making and governance that diversity enables within an organization.” – Credit Suisse
Experts theorize that having women in leadership roles increases the diversity of skills, and helps to recruit, promote, and retain talent – which leads to better financial performance. Having three or more women changes boardroom dynamics substantially, and is needed to create a “critical mass” of women which “enhances the likelihood that women’s voices and ideas are heard.” Despite this, on a global basis, only 15% of firms have women on their boards, and only 20% of those firms have three or more women on their boards.
Having 3 or more women changes boardroom dynamics substantially and “enhances the likelihood that women’s voices and ideas are heard.” – Catalyst
Tell that to embattled Uber CEO Travis Kalanick. Had he the good fortune (and good sense) to hire a COO (and board member) like Sheryl Sandberg as his #2, Uber may have steered clear of their boy’s club sexism scandals and controversies, and their talent may have stayed and grown in their roles. (It’s noteworthy that Uber ranks lowest among its Silicon Valley peers for women – at just 15% of its workforce. Further, until a year ago Uber’s board was all-male. Uber just tapped Huffington Post co-founder and editor-in-chief Ariana Huffington as the first woman to join their board in April 2016, as they continued to suffer PR troubles and missteps.)
“If some firms discriminate against talented, hardworking, effective women, then they will be outperformed by rivals that don’t discriminate.” – Marcus Noland, EVP, Petersen Institute
Fortune found that the number of women in CEO positions in America’s Fortune 500 decreased from 24 to 21 companies between 2014 and 2015, and that only 4.2% of America’s Fortune 500 companies had women in CEO positions in 2015. When it comes to board seats, the U.S. lags behind Europe – just 20% of S&P board seats are held by women.
While the use of quotas to increase diversity is a controversial subject in the U.S., Europe introduced quotas for female board members, and it seems to be working. Norway was the first country to introduce quotas in 2003, requiring companies to fill at least 40% of their board seats with women. Now, over 46% of Norway’s board members are women. In Iceland, it’s 44%, in France 46%, and in Germany 26%.
“The goal of quotas is to get enough women in board positions that they help steer the hiring and promotion of women in their companies, and eventually the changes will ripple across the economy. Norway offers some evidence that it is working, albeit slowly.” – Quartz
In an interview for International Women’s Day, Kirstine Stewart, chief strategy officer at Diply and former Twitter VP, talks about her disappointment with gender diversity in the tech industry, which as the “new frontier” had the opportunity “to break all the rules” and hasn’t – so far. She addressed the use of quotas, and the possibility that they could lead candidates to feel stigmatized, lonely, and wondering if they are there because they “ticked a box.” A more moderate approach between quotas and “comply and explain” rules is to directly incentivize individuals throughout the entire organization to increase diversity. This overhaul needs to be systemic, benchmarked and measured.
“The Fearless Girl” statue which stares down the Wall Street bull in the accompanying image was installed by State Street Global Advisors and its agency, McCann for International Women’s Day. Conceived, created, and sculpted by women, (senior copywriter Tali Gumbiner, senior art director Lizzie Wilson and sculptor Kristen Visbal), it quickly became an overnight sensation. After conducting studies that found companies with gender-diverse leadership, and women in leadership are more lucrative, State Street started SHE, an ETF (exchange-traded fund) which only invests in companies with women in leadership. Their goal is to increase the number of women on their clients’ corporate boards.
The hunt is on for the next generation of female leaders, with companies and recruiters eager to find, nurture, develop, and guide talented women. According to Anouk Pappers, founder and brand anthropologist for CoolBrands, an international firm which helps executives with their online positioning and reputation, 70% of their clients are women – and their numbers are growing. Many are seeking help in repositioning themselves within the C-suite, toward entrepreneurship, or to transition to move from a corporate career to board membership. They recognize that they “need a ‘wing woman’ to better position themselves for the future.”
Warren Buffett, chairman, and CEO of Berkshire Hathaway, and one of the world’s most successful CEOs didn’t need quotas to realize that women were good for business. He’s already invested in six companies with CEOs who are women, and is “looking for more.” Berkshire Hathaway has three women on its board and is looking to increase that number.
“What makes me even more enthusiastic about the future, is that 90% of that time [in the past] we were only using half of our talent. Think about what would happen if we used all the talent for 100% of the time. It’s like having one hand behind your back.” – Warren Buffet
MSCI research estimates that, at the current pace, it could take companies to 2027 to achieve directorship numbers of 30%. Asset owners and advocacy groups like the Thirty Percent Coalition are working to accelerate this to 2020. The case for having women on the board is clear, with Uber’s missteps serving as a cautionary tale, and Warren Buffet as an enthusiastic indicator that women leaders are good for business.