I argued the case against gender quotas in Women’s Agenda last year. I suggested that focusing instead on building an irrefutable business case for gender diversity was more productive and avoided the illegitimacy taint of quotas.
As the push for quotas again gains prominence, it’s timely to note that there is a less divisive path to gender equity on boards. The key is engaging company shareholders.
The proof’s in the research
A growing body of research is establishing a nexus between greater participation of women on boards and increased company profits for shareholders.
A 2007 Catalyst study of Fortune 500 companies over four years found that on average, companies with at least three female directors performed stronger than other companies. According to The Bottom Line: Corporate Performance and Women’s Representation on Boards, a 66% greater return on capital, a 42% outperformance in in sales and 53% greater return on equity are attributable to companies with a higher representation of women on their boards. Companies with at least three female directors produce on average 5.3% higher profits. The correlation was found across a wide breadth of industries and sectors.
In 2010, McKinsey and Company’s report The Business of Empowering Women found that companies with gender-balanced boards achieved a 56% higher operating profit than male-only boards.
In 2012, a report on gender diversity by the Credit Suisse Research Institute found that among 2,400 companies over the preceding six years, the shares of companies with at least one female director outperformed companies with no female directors, to the tune of 26%.
In the 2013 report Does the Gender of Directors Matter? Harvard University economist Miriam Schwartz-Ziv studied 402 boards in Israel, concluding that those with at least three male and three female directors produced higher returns to shareholders.
These studies also looked at all sorts of other benefits that companies derive through diverse leadership teams, including more robust decision making and greater chief executive accountability. It’s fertile ground for Australian researchers to build upon.
Gender equity on boards in the hands of shareholders
The power to demand greater female representation on boards rests with shareholders.
Instead of focusing on unpalatable regulation in the form of contrived quotas, wouldn’t it be more effective if proponents of gender equity focused their attention on educating and lobbying shareholders about the value of more women on company boards? If it’s good for the bottom line and the health of the company, shareholders should be a captive audience.