Gender Diversity on Boards Pays -- But Not Always and Not in Every Way
Too Much of a Good Thing Can Actually Hurt the Bottom Line
Gender diversity pays for boards, two researchers proved, in terms of board and corporate performance. But they also were unable to show a universal link between board diversity and the bottom line. — but only up to a point.
- Women have lower rates of absenteeism at board meetings.
- The presence of women on boards increases male attendance levels.
- Companies with more diverse boards have more board meetings.
- The very fact that boards with greater gender diversity tend to be more active and engaged may hurt corporate performance, the researchers submit. “Thus, it is possible that diversity only adds value when additional board monitoring is needed.”
- “[W]e find that diversity has beneficial effects in companies with weak shareholder rights, where it is plausible that additional board monitoring can enhance value, but detrimental effects in companies with strong shareholder rights.”
- Despite the mixed results, “[O]ur results show that, although they may have been selected because of tokenism, female directors have a substantial and value-relevant impact on board structure.”
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Comments
jacqui robertson wrote on 18.03.2010 11:59:48:
I have a question on your article:
Your article states: The very fact that boards with greater gender diversity tend to be more active and engaged may hurt corporate performance, the researchers submit. “Thus, it is possible that diversity only adds value when additional board monitoring is needed.”
How can a board that\'s more active and engaged actually HURT corporate performance. This defies reason. Unless, you\'re saying too much of a good thing can be bad.
also, do you have any research on companies with PROOF that their companies are doing better because of Diversity at higher levels?
Robert Youngblood, Associate Editor, 20-first wrote on 18.03.2010 12:31:27:
Dear Ms. Robertson,
It\'s amazing but true: There is a clear-cut connection between gender diversity and better board oversight ... but gender diversity and its attendant monitoring can actually hurt corporate results.
\"Too much of a good thing\"? Not necessarily. First of all, there are outside factors. One is that stock prices tend to decline in the short term the more women there are in top management (especially) and on boards. Then, internally, you must remember that women on boards tend to be non-executive directors, and Neds often need time to become fully familiar with the operations of a company, which means their added oversight can be a short-term hindrance to operations. Finally and perhaps most importantly, robust oversight can be beneficial in the long and even medium term, but in the short term it can complicate business, even if in the process it is repairing long-ingrained inefficiencies (or worse) at a company.
As Dr Adams notes in an article about the research (http://www.20-first.com/685-0-women-have-beneficial-impact-on-board-governance.html) she wrote for 20-first, \"the relationship between gender diversity on boards and firm performance is more difficult to interpret\". She accepts as a given that increased oversight can hurt performance (and the reasons above are 20-first\'s interpretations, not hers). And she concludes: \"gender diversity has beneficial effects in companies with weak shareholder rights, where it is plausible that additional board monitoring can enhance firm value, but detrimental effects in companies with strong shareholder rights.\"
As for proof that companies do better becaus of greater diversity at senior levels: Studies about correlating gender diversity with stronger company results, but proving causation is of course virtually impossible. But have a look at the below hyperlinks to just a few worldwide documentations, and we think you will draw the conclusion that there must be some causal relationship.
http://www.20-first.com/9-0-better-bottom-line.html
http://www.20-first.com/1266-0-women-led-companies-outpaced-the-2009-stock-rally.html
http://www.20-first.com/847-0-proof-that-diversity-in-a-company-increases-sales-profit-and-more.html
http://www.20-first.com/708-0-not-just-ceos-having-a-woman-cfo-also-benefits-companies.html
http://www.20-first.com/817-0-women-on-the-board-not-only-aid-bottom-line-but-thwart-bankruptcy.html
and many more such articles in our WHY section.
Thank you for your interest and your question -- it\'s a joy to go back and realise just how much evidence there is, and you raise some excellent issues.
Yours,
Robert Youngblood