Diversity and Boardroom Benefits

There has been much debate surrounding the place of women regarding corporate governance, but recently the question has turned from “why are there so few women in the boardroom?” to “How can we bring more women to the boardroom?”

There is a strong feeling that women are not being treated equally in the workplace, and that issues such as compensation and placement in the boardroom still have some way to go before equality is reached.

There are well known statistics demonstrating the positive impact women have on the boardroom. Many of these statistics clearly show that companies benefit greatly from having female board members. Companies with higher female representation outperform those with lower representation by over 80% on return on sales, 60% on return on invested capital, and 46% on return on equity.

In addition to these key facts, it appears that that the corporate board members themselves agree. AESC executive search firm, Spencer Stuart’s 2012 survey showed that 80% of board members believed that boardroom diversity “increased value for shareholders.” New research has also shown that it only takes one woman on a board for the company to start noticing the positive impact, rather than three as was previously assumed.

And, of course, bringing more female executives into board positions has self-perpetuating effects. If women are able to have professional role models in board positions, they can envision themselves achieving the same and will be more likely to put themselves forward, knowing that this is a realistic career goal for them.

Female Candidates and (Under)Representation

Despite all research showcasing the importance of boardroom diversity, companies are slow to react. In 2013, just 16.9% of Fortune 500 board seats were filled by women, and the percentage increase of women board members only raised by 2% from 2006 to 2013.

In the famously forward thinking Silicon Valley area, where you may expect these figures to show more encouraging signs, women are underrepresented yet again. Of the 128 Silicon Valley companies representing $1.2 trillion in shareholder value, just 6.6% of their highest-paid executive positions filled by women, with less than 9% on boards.

Government Intervention

Many governmental authorities are becoming increasingly aware of their role to fight inequality. While the government of the USA has been slow to act, and there are still few official nationwide sanctions, California has recently become the first state to pass legislation to formally encourage companies to voluntarily increase their numbers of female board members, in Senate Resolution 62. Globally, each government has taken a dramatically different approach in tackling the issue. Some of the most interesting examples can be seen below:

• France: A new law has been passed, requiring listed companies to reserve 40% of board seats for women by 2017.

• Norway and Iceland: They have begun enforcing a strictly mandated quota to encourage growth.

• Finland: This government has but in place so called ‘shame tactics’ whereby companies must publically explain themselves if they do not have female board representatives.

• Sweden: Governmental incentives have been established to promote women in the workplace, such as tax deductions for child care.

The Solution

In terms of answering the question “How do we get more women on boards” there seems to be a few clear answers. While government legislation can help propel the initiative, it is the overall responsibility of the companies themselves to be responsible for driving diversity. Women who gain high positions inspire more women to do the same; therefore companies need to become more aware of what they are doing to decrease the barriers of female career advancement.

Executive search firms and C-level executives may introduce candidates and influence the process, but it is ultimately the board who will make the final decision.

For more advice on diversity issues and/or how to gain your board seat, watch the recording of our September 2014 webinar,  Closing the Gap: Diversity and the Boardroom. To view this recording and the full BlueSteps Podcast Library, login or join BlueSteps today!