Board diversity by the basics: the bottom line about getting women into CXO roles

December 10, 2010 12:12 PM

We know companies with a larger percentage of women directors show a higher incidence of "positive events"[ .pdf ], while "Women Matter" [ .pdf ], a 2007 McKinsey study found that adding Women to a company's board of directors improved ROE, EBIT and share price growth. A business case for including women on the board.

"Women Matter" was followed up by several additional McKinsey studies, most notably an evaluation of corporate performance and female styles of management [ .pdf ] and a review of how firms can best achieve gender diversity at the CXO level [ .pdf ].

At the same time non profit research firm Catalyst found the top quarter of Fortune 500 companies with positive gender diversity outperformed those in the bottom quarter with a 53% higher return on equity [ .pdf ].

How many women must serve on a board before a firm can realise benefits? A difficult, if not impossible question to answer, but studies show firm outperformance seems to happen once there are at least three female directors in the boardroom.

While the always astute Warren Buffett once said¹ he was "privileged to work during a period when it was only necessary to compete against half of the population", he clearly wasn't talking about 2010: women now drive the global economy, representing a bigger growth market than India and China combined.

¹NB: This quote is cited in several papers but an authoritative source can't be found.

posted by Mutant (16 comments total)

Because god forbid anybody ever do anything for any other reason than that there is a "business case" for it.
posted by enn at 12:21 PM on December 10, 2010 [4 favorites]

Thank you for the well constructed post Mutant, and I'm looking forward to going through it


but there's a niggling feeling I can't shake off that something like this may have been posted before? Just wondering? Or did I see the reports in the news and am simply feeling deja vu?
posted by The Lady is a designer at 12:33 PM on December 10, 2010

Because god forbid anybody ever do anything for any other reason than that there is a "business case" for it.

If it would make you feel better we could also pass laws to force them to do it.
posted by ZenMasterThis at 12:49 PM on December 10, 2010

Because god forbid anybody ever do anything for any other reason than that there is a "business case" for it.

Would it make you feel better if women made businesses underperform? This is all good news.

Actually, if women did make businesses significantly underperform, wouldn't that call into question some of the programs designed to help women? Much of progressive modern life is predicated on the (correct) idea that *isms are are wrong - not just wrong in some abstract sense that those ideas are naughty, but that those *isms are fundamentally incorrect and generally bad for society. It's good and fitting that continued research should continually show that women's presence at work makes things better and not worse. Research and results like this are worth trumpeting.
posted by Sticherbeast at 12:55 PM on December 10, 2010 [1 favorite]

From the "CXO level" link:

Our 2010 Women Matter survey . . . identified two main barriers to gender diversity in top management. The first one is the “double burden” syndrome – the combination of work and domestic responsibilities  – which is difficult to reconcile with the second barrier: the “anytime, anywhere” performance model. . . . Interestingly, women respondents identified a third important barrier: the reticence of many women to advocate for themselves

which itself is strongly shaped by social conditioning. Egs of this, drawn from Linda Babcock's Women Don't Ask and Ask For It:

backlash for being insufficiently "feminine" -- smiley and pretty and nice and agreeable -- while advocating for themselves; internalized mores about how it's selfish to advocate for yourself at all, and how ambition is undesirable and unattractive in a woman. (Like, CJ in The West Wing asking with dismay, "I'm not ambitious. Am I?")

Thanks very much for this post. I'm looking forward to reading the rest.
posted by cybercoitus interruptus at 1:02 PM on December 10, 2010

There's two potential bits of correlation/causation conflation going on here, innit?

1) "companies with positive gender diversity outperformed" may just be because companies with positive gender diversity are simply more progressive/forward-thinking anyways and these are traits that would help them outperform even with an all-male board.

2) due to entrenched sexism, any woman that gets appointed to a leadership position is maybe on average automatically already more qualified than her male peers.
posted by juv3nal at 1:05 PM on December 10, 2010 [4 favorites]

I've worked at male centric and female centric companies (in the marketing/creative dept) and the one thing I noticed was MBA focused women don't get the company very far. They want data and will do anything to make sure data = success even if it's an outright lie.

The times where I saw women into more of a creative/strategic focused mindset then the marketing message and direction were smart.
posted by stormpooper at 1:10 PM on December 10, 2010

A line from the 2003 romantic comedy Down With Love: "And to think, I was really starting to believe that women weren't cut out for the workplace...when the only problem was the workplace wasn't cut out for women!"

due to entrenched sexism, any woman that gets appointed to a leadership position is maybe on average automatically already more qualified than her male peers.

I got a mental image of Alice and pointy-haired boss.
posted by Nixy at 1:12 PM on December 10, 2010 [1 favorite]

this is awesome because it saves me research time :D i was on a TEDx TEDWomen panel on Thursday and many of these statistics where shared.

that said, and i've been repeating this a lot lately, studies like the ones presented here can't help but make me focus on what's missing. as someone who gets repeatedly invited to talk about "why women matter" or "why latinos matter" or "why people of color matter", i just look to the day when the opportunities of diversity are considered in the absolute instead of being piece-mealed based on ability, ethnicity, gender, race, sex or social class.
posted by liza at 1:14 PM on December 10, 2010

I noticed was MBA focused women don't get the company very far. They want data and will do anything to make sure data = success even if it's an outright lie.

There we go.
posted by geoff. at 1:32 PM on December 10, 2010

"that those *isms are fundamentally incorrect and generally bad for society. It's good and fitting that continued research should continually show that women's presence at work makes things better and not worse."

But, of course, the way that something effects a business is not a claim for it being good or bad for society.
posted by oddman at 1:34 PM on December 10, 2010

But none of this applies to former CEO women who run for political office as Republicans, right?
posted by oneswellfoop at 1:50 PM on December 10, 2010 [1 favorite]

"companies with positive gender diversity outperformed" may just be because companies with positive gender diversity are simply more progressive/forward-thinking anyways

Yes, that was my thought when reading this. Good companies are good companies for a number of reasons. While it is nice to see figures like this in print, I think trying to simply boil it down to one factor and assume everything else equal is jumping the gun. A good amount of gender diversity in a successful company is likely indicative of a lot of other successful policies and progressive attitudes about equality and advancement.

Certainly, these figures should be food-for-thought for businesses considering their internal policies and practices, but lets not pretend this one factor is a magical fix. Companies should be lauded for gender diversity, but asking questions like "How many women must serve on a board before a firm can realise benefits?" is sending the wrong message.
posted by Avelwood at 1:51 PM on December 10, 2010 [1 favorite]

It occurs to me that the sort of workplaces which wouldn't consider having a woman on the board until there was a 'business case' based on research that having any women on the board makes a company more productive would be the sort of place where the immediate cost savings and benefits would be seen as no longer needing a secretary to make coffee and take minutes at board meetings.
posted by robertc at 3:24 AM on December 11, 2010

If women have to work harder than men to get on these boards, then that process will select the absolute best women possible for those few positions available to them.

If the opportunities were equal, the same level of intelligence/idiocy would be found by inclusion of women, as there is with an all-male board.

It's not the inclusion of women that makes the company better, it's the fact that the prejudice itself restricts for the best and brightest. The line of thinking that leads people to the "women involved = better decisions" is, in itself, bigoted.
posted by swimming naked when the tide goes out at 4:56 PM on December 11, 2010

"Women involved = better decisions" is not bigoted; it's just reasonable. There's no actual evidence that there is a higher or lower percentage of idiotic women compared to idiotic men at the top of the business world. But if you exclude a whole 50% of the population from power, then it's clear that you're missing out on a huge talent pool.

I think one explanation for the connection between women at the top and better performance is simply that these companies are getting access to a numerically bigger talent pool because they're not excluding women.

Firms that get out in front of the crowd in recruiting women (and minorities) also have a talent-pool advantage because of the snowball effect: more talented women and minorities will go to firms where they are already represented. (I have experienced this in my own career -- after having worked for a women-led company, I just flat out will not even consider working anywhere disproportionately male dominated.)
posted by yarly at 11:23 AM on December 12, 2010