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Women On Boards: Slow Progress And Marginalization, Study Shows

This article is more than 8 years old.

Quotas work. But they have failed to boost women into top jobs. That’s the message of a 71-page report on gender diversity on corporate boards around the world, released this week by consulting firm Deloitte Global.

Called “Women in the Boardroom: A Global Perspective,” it analyzes female board representation at 6,000 companies in 49 countries, including 2,806 companies in the U.S. alone. (The report is uneven on its company counts. In Colombia it examines only 11.) The big picture: 12% of board seats are held by women worldwide, equivalent to the percentage of board seats held by women in the U.S. But women’s participation doesn’t flow into the top slot. Only 4% of companies are chaired by women globally, and only 3.4% in the U.S.

In its country by country breakdown, the report highlights how quotas can lift female board representation. An increasing number of countries are legislating quotas, requiring companies to appoint boards that include up to 40% women. Socialist-leaning Norway is a pioneer, passing the first such law in 2005. Companies had until January of 2008 to comply, or risk being dissolved. But numbers haven’t quite gotten to 40%. At the 22 Norwegian companies Deloitte analyzed, 36.7% of board seats are held by women. Still, that lands Norway at the top of all the countries Deloitte examined, an impressive showing. But just 18.2% of Norwegian boards have women chairs.

Denmark also has a quota rule, though it’s less stringent than Norway’s. Deloitte reports that Danish legislation requires companies to “work actively” toward gender equality (40% board participation by women), but there are no sanctions attached to the law. Nevertheless, Danish boards have 21.8% female representation, among the highest in the report. Yet female board representation has not translated to board leadership. There are no corporate boards chaired by women in Denmark.

“You can get the number of women on boards to go higher,” says Deloitte Global managing director Dan Konigsburg, “but what are you really changing? Has the number gone up where it really matters?” His point: it may be possible to up the number of women on boards, but if those women don’t ever get to be chairs, their influence will be limited.

While most of the board quota legislation is in Europe, India and Malaysia have both passed laws requiring corporate boards to appoint women. India’s law is weak, requiring publicly traded companies to appoint only a minimum of one woman to their boards, but Malaysia’s requires female board representation of at least 30% by 2016.

Though quotas have clearly increased the number of women on boards—France, Italy and Finland all have quotas and board representation above 20%, among the top five in the Deloitte report--quotas remain controversial and they have produced some unintended consequences. One of the chief criticisms: quotas force companies to appoint under-qualified women in industries dominated by men, like technology, chemicals and construction.

There is also the so-called “golden skirt” problem of a limited number of women sitting on multiple boards. According to the British newspaper The Telegraph, one Norwegian woman, lawyer Mimi Berdal, 55, at one point sat on a difficult-to-fathom 90 different boards.

Do women really improve the performance of companies where they serve? The literature has been mixed. One of the most oft-cited studies is a 2007 report from Catalyst, a New York non-profit that promotes the inclusion of women in the workplace. The report looked at big companies with the greatest number of women on their boards and found striking result, like a 53% greater return on equity at companies where women were well represented (it compared the top quartile with the bottom quartile) and a 66% greater return on invested capital. But critics have said that Catalyst is promoting an agenda and that its research is not objective.

A 2013 Atlantic story by Christina Hoff Sommers, an American Enterprise Institute scholar with a neo-conservative take on many feminist positions, calls the economic case for gender quotas “shakier than its advocates seem to realize.” One 2008 paper in the Journal of Financial Economics found that while women directors were better about going to meetings, their average effect on firm performance was negative and that quotas can cut values for well-run firms. A 2010 literature review by two Stanford legal scholars who have advocated for women on boards, nevertheless found no clear correlation between board diversity and financial performance. There was also a 2010 University of Michigan study of Norwegian firms showing that higher female board membership translated to worse financial performance. “The quota led to younger and less experienced boards. . . and a deterioration in operating performance,” said the study.

But to me the most convincing study is a comprehensive literature review by Corinne Post and Kris Byron, management professors at Lehigh and Syracuse universities, covered in Fast Company in January 2015. The professors reviewed an exhaustive 140 studies that covered 90,000 firms from 35 countries between 1989 and 2014. The bottom line, as Fast Company’s Lindsay Lavine put it: “Overall, when women are on boards, companies are more profitable.” Study author Post told Lavine that women directors bring their diverse perspectives to the boardroom, and that they’re “more inclusive in their communications and interactions with others.”

At Deloitte, consultants like Konigsburg are in the trenches with companies who make important decisions every day and he agrees with Post and Byron. He says he and his colleague have seen how women directors enhance company performance. “We’ve found from our experience that more diverse boards are better boards. We advocate this because of a selfish desire to have better clients and better-governed clients.” That goes for racial integration as well, he adds. He says investors are also convinced. “This is not treehuggers or people with a social agenda,” he says. “These are just people saying this is about making companies perform better.”

But while Konigsburg acknowledges that quotas have upped the numbers of board seats held by women, mostly in Europe where quotas are prelevant, he is mainly concerned about two things: complacency and failure to elevate women into the chairman’s seat where they’ll wield real influence. The golden skirt problem is real, he says, which means just a handful of women have their voices heard across companies and often those women are the wives or daughters of influential men. “Are you really getting different points of view?” he asks.

I’ll take a step further, which may rankle some Forbes readers. As Stanford legal scholars Deborah Rhode and Amanda K. Packel argue in their 2010 literature review, no matter what the evidence on financial performance (and I’m convinced the evidence points to the presence of women board members improving corporate numbers), there are compelling reasons that women should sit on corporate boards and even more importantly, should run them, rooted in social justice and equal opportunity. Like increasing women’s representation in all leadership posts, from politics to educational institutions to corporate leadership, boosting their representation on boards is simply the right thing to do. The Deloitte report underlines how far we have to go.

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