Wednesday, April 8, 2015

The business case for advancing women in business and management

Academics and analysts have been examining to what extent more gender balance in management teams and boards actually improves business performance and if the “bottom line” is negatively affected when all decision-makers are men only. Several important studies, some mentioned below, have concluded that women’s participation in decision-making is positive for business outcomes, though some indicated there might not be a direct causal link.

 McKinsey & Company researched the relationship between organizational and financial performance and the number of women managers. It found that European listed companies with more women in their management teams had 17 per cent higher stock price growth between 2005 and 2007, and their average operating profit was almost double their industry average.

A 2011 report of the organization Catalyst16 found that Fortune 500 companies with the most women board directors outperformed those with the least by 16 per cent on return on sales. Companies with the most women on their boards outperformed those with the least by 26 per cent on return on invested capital. Companies with high representation of women – three or more – on their boards over at least four to five years, significantly outperformed those with low representation by 84 per cent on return on sales, by 60 per cent on return on invested capital and by 46 per cent on return on equity.
In 2012 Credit Suisse19 compiled a database on the number of women – since 2005 – sitting on the boards of the 2,360 companies constituting the MSCI AC World index.20
This research was more comprehensive in terms of geographical scope than other studies, covering all regions except Africa. The outcome shows that, over the previous six years, companies with at least one female board member outperformed by 26 per cent those with no women on the board in terms of share price performance.

While there is considerable research on how gender balance in management impacts the bottom line, making causal links is still a challenge. It has been noted that companies that promote women to top jobs are often those that invest a great deal in research, innovation and technology. More research, especially in developing regions, would be of immense value, especially for those many organizations that are actively advocating for greater inclusion of women in all walks of life.
But there is no lack of research pointing to the hurdles experienced by women on the corporate ladder, as well as on measures that have been successful in promoting women in business and management.

While women have greatly increased their share of management jobs and as entrepreneurs over the last two decades, all data sources and analyses report a continuing dearth of women in top decision making positions, as CEOs and board members. The situation is not much better in politics: In March 2014, just 18 women were heads of state, and women were only 22 per cent (22.9%) of all elected parliamentarians worldwide in April 2014.

The ILO company survey in the developing regions found that women were just over 20 per cent of CEOs. The survey respondents were mostly middle to large national companies. This reflects that more women are able to reach top jobs in local companies as compared to large publically traded businesses and international companies. Women Board Members: The 2013 Catalyst Inc. survey of the percentage of board seats held by women over recent years in 44 countries is shown in Table 2 below. The results indicate that in just four countries women represent over 20 per cent of board members (Finland, Sweden, Norway and United Kingdom); in 13 countries between 10 and 20 per cent; in 14 countries between five and 10 per cent and in 13 countries less than 5 per cent.

The ILO company survey found that 30 per cent of the respondent companies had no women on their boards, while 65 per cent in total had less than 30 per cent women; 30 per cent being often considered as the critical mass required for women’s voices and views to be taken into account. Thirteen per cent had gender-balanced boards with between 40 and 60 per cent of women. 
When it comes to a woman being the chairperson of a company board, the percentages decline sharply. While data from different sources vary, they generally show the small degree to which women are leading boards – generally in the range of zero to a few per cent. The 2013 GMI Ratings Survey21 found that only in Norway was the proportion more significant at 13.3 per cent, followed by Turkey at 11.1 per cent. In the 44 countries covered by the survey there were 19 countries in which not a single company had a woman board chairperson. In a number of countries there was some increase in the percentage of women as chairpersons from 2009 to 2013 while in others it declined. 
The ILO company survey found that 87 per cent of the boards of respondent companies had a man as president while 13 per cent had a woman as president. 
Some commentators describe progress as “glacial” and consider that unless action is taken it could take 100 to 200 years to achieve parity at the top. One consequence of this inertia is that a number of countries have moved to legislate controversial mandatory quotas for women on company boards, with Norway being the first. The European Union is currently considering extending these to its member states with a draft Gender Directive passed by the European Parliament in November 2013 and still under consideration by the European Council of Ministers as of mid-2014. Other countries, notably Australia, Canada, Hong Kong China, India, Malaysia, Singapore, Pakistan, United Kingdom, United States of America, while stopping short of quotas, have adopted a variety of measures to promote more women in management, such as inclusion of gender diversity requirements and reporting in corporate governance codes, codes of conduct, voluntary targets and cooperative initiatives between business and government.

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