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International Women’s Day 2021 – Women leaders

Written by Professor Sharon Mavin.

 

Three or more women directors on company boards results in positive and significant improvement in company performance!

Our research with 81 women leaders at the very top of the FTSE100/250 and organisations in the North East Region shows how women across the age range (33-67 years) can become Executive/Non-Executive Directors and be ‘the’ leader[1]. So what happens to company performance once women are there? On International Women’s Day 2021 I’m ‘Choosing to Challenge’ by providing evidence of why organisations should proactively diversify boards. As our region’s aim is to grow and develop a more productive, inclusive and sustainable regional economy, how could a proactive strategy of inclusivity for women leaders impact positively on company performance and influence the future of work?

There is an unequivocal highly significant positive effect on financial performance when three+ women are appointed to the board of FTSE 100 companies.[2] Women’s boardroom presence leads to improvement in company performance measured by return on equity.[3] A ‘critical mass’ of three+ women on boards results in increased managerial accountability.[4] Three+ women executives can change boardroom dynamics substantially, creating environments where innovative ideas can increase firm innovation.[5] Gender diverse boards commit fewer financial reporting mistakes, engage less frequently in fraud schemes[6] and improve the informativeness of data for stockholders and the quality of corporate governance.[7] Cybersecurity has had a big impact on our region – research shows a positive association between presence/level of cybersecurity disclosure and board gender diversity but boards must boast at least three women before this is observed.[8] Board gender diversity reduces “old boys’ club” effects and groupthink mentality.[9] In 2017, the UK government recommended FTSE100 companies have 33% women in leadership teams by 2020 (Hampton Alexander report). If we want to improve North East company performance then three+ women on boards should make a difference: ‘one is a token, two is a presence and three is a voice’[10] of gender diversity in the boardroom.

[1] Mavin, S., Williams, J., Bryans, P., & Patterson, N. (2015). ‘Woman as a project’: key issues for women who want to get on. in Handbook of Gendered Careers in Management. Edward Elgar Publishing.

[2] Brahma, S., Nwafor, C., & Boateng, A. (2020). Board gender diversity and firm performance: The UK evidence. International Journal of Finance & Economics.

[3] Joecks, J., Pull, K., & Vetter, K. (2013). Gender diversity in the boardroom and firm performance: What exactly constitutes a “critical mass”? Journal of Business Ethics, 118, 61–72.

[4] Adams, R. B., & Ferreira, D. (2009). Women in the boardroom and their impact on governance and performance. Journal of Financial Economics, 94, 291–309.

[5] Konrad, A. M., & Kramer, V. W. (2006). How many women do boards need? Harvard Business Review, 84(12), 22.

Konrad, A. M., Kramer, V., & Erkut, S. (2008). Critical mass: The impact of three or more women on corporate boards. Organizational Dynamics, 37, 145–164.

Carolyn Wiley and Mireia Monllor-Tormos,(2018) “Board Gender Diversity in the STEM&F Sectors: The Critical Mass Required to Drive Firm Performance,” Journal of Leadership & Organizational Studies, vol. 25, no. 3.

[6] Wahid, A. S. (2019). The effects and the mechanisms of board gender diversity: Evidence from financial manipulation. Journal of Business Ethics, 159(3), 705–725.

[7] Baker, H. K., Pandey, N., Kumar, S., & Haldar, A. (2020). A bibliometric analysis of board diversity: Current status, development, and future research directions. Journal of Business Research, 108, 232–246.

Gul, F. A., Srinidhi, B., & Ng, A. C. (2011). Does board gender diversity improve the informativeness of stock prices? Journal of Accounting and Economics, 51(3), 314–338.

[8] Radu, C., & Smaili, N. (2020) Board Gender Diversity and Corporate Response to Cyber Risk: Evidence from Cybersecurity Related Disclosure. Journal of Business Ethics, 1-24.

[9] Van Knippenberg, D., De Dreu, C. K., & Homan, A. C. (2004). Work group diversity and group performance: An integrative model and research agenda. Journal of Applied Psychology, 89(6), 1008.

Wahid, A. S. (2019). The effects and the mechanisms of board gender diversity: Evidence from financial manipulation. Journal of Business Ethics, 159(3), 705–725.

[10] Kristie, J. (2011). The power of three. Director Boards, 35(5), 22–32.

One thought on “International Women’s Day 2021 – Women leaders

  1. So powerful to provide empirical evidence that backs up a moral imperative to promote more women to senior business roles.

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