Since then, countries like Spain, Iceland, France, Italy, Belgium, Portugal, Netherlands, Germany, Austria and India, have followed suit with their own quotas. Initial targets were set low but the last decade has seen considerable progress in creating more diverse boards. In March 2020, the European Commission announced it would attempt to reach a gender balance of 50% within its own management structure by the end of 2024. In 2018, California became the first U.S. state to mandate gender quotas for publicly traded companies incorporated in the state or risk facing heavy fines.
The business case supporting diverse boards is reasonably well established now. A growing body of research shows a range of business benefits associated with gender diversity on boards. Benefits include improved financial performance and shareholder value – average profitability of companies with diverse boards was higher by 43% and, on the other hand, companies with non-diverse boards showed a 29% decrease in profitability. A study at Stanford analysed 49 gender diversity reports and found a clear pattern: higher diversity numbers translated into higher stock prices. If a company’s diversity numbers beat those of the industry leader, the bump in stock price was even stronger.
A report by the International Labour Organization (ILO) states that boards with women members are more likely to focus on non-financial performance indicators such as customer satisfaction and corporate social responsibility, and are better able to monitor board accountability and authority, leading to improved corporate governance. The presence of women on boards reinforces a company’s culture and public image of diversity and inclusion, thus allowing companies to retain and cultivate their best talent at all levels. It is amazing how studies have been able to establish a causal relationship between gender diversity and a heap of business benefits.
What I find surprising and rather ironical is how these studies fail to trace the cascading effect of diverse boards on to diversity in top management, diversity in floor managers, diversity in the workforce or diversity in the supply chain. Because isn’t that where the conversation started? With saying that diversity is critical?
Let’s think about it – what are the areas in which an organization can measure gender diversity? Boards, C-Suite, Managers, Workforce, Supply-Chain, Customers. Across all these categories, the easiest fix is the Board – it is tremendously possible to find capable women directors and all you need to do, is to onboard them. You don’t need to change the company’s culture, or its policies or disrupt business-as-usual. And you definitely don’t need to review all your employment practices and train all your managers in order to remove the glass ceilings that women must meet on their way up the corporate ladder. And if you refer back to the ILO report, you still manage to establish yourself as a diverse company.
Looking at some data from India. Women hold 17% board positions in corporate India while only 3.7% of CEOs of NSE-listed companies are women and only 29 companies on the Fortune India 500 list for 2019 had women in executive roles.
My premise is that a diverse board is already aware of the data that establishes tangible financial and non-financial benefits to business, stemming from diversity. It piques my academic curiosity to see if diverse boards have been able to extend the rationale forward and encourage companies to take a serious look at gender diversity across different levels. Do diverse boards ask for diversity to be a priority for the company? Do they push for bringing diversity in key personnel appointments? Sadly, the data doesn’t signal so and research seems to ignore my curiosity.
So I chatted with a few board regulars. Do women directors bring up gender diversity as a priority for the company? Generally speaking, not. Women directors, in many parts, are still buried under the pressure to be as business-like and business-oriented as their male counterparts. The pressure to speak the same language and “be one of the group” is immense. I know, I have been through it. You constantly hear about women being doubly prepared. It is not because they need that extra preparation in order to be valuable contributors. They need extra preparation in order to fit their contributions within the ‘norm’. And you don’t want to be the only woman director on the board and the one talking about how important gender diversity is. Nope, you want to focus on bringing your best business-self to the table.
Decades of research has been instrumental in establishing the business case for women on boards. And the business case for gender diversity. I wish it would connect the two – why isn’t improved gender diversity within the organization a business benefit that accrues from having women on the board? If gender diversity is good for business, isn’t it good business for boards? And therein lies the missed opportunity.
(Nupur Garg is the Founder of WinPE – a not-for-profit platform, which promotes transformation in the investing world in favour of gender diversity.)
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