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On International Women’s Day in 2013, U.S. President Barack Obama remarked that, “Empowering women isn’t just the right thing to do, it’s the smart thing to do.” Just last month Germany became the latest nation to institute a mandatory requirement for the number of women in supervisory board positions, joining such countries as Norway, Iceland, Spain, France, Italy and Belgium with boardroom quotas ranging from 30-40 percent. By comparison, currently about 19 percent of board seats at U.S. stock index companies are held by women. The numbers are moving in the right direction, and the quotas mandated throughout Europe have opened the door, but the business potential is the greatest case for gender diversity on corporate boards.
So let’s examine why, as President Obama stated above, empowering women is the smart thing to do.
Seventy two percent of respondents to a recent McKinsey survey believe there is a direct connection between a company’s gender diversity and its financial success. And a recent article in the Guardian noted that Fortune 500 companies with the highest representation of women board members achieved considerably higher financial performance compared to those with the least. Specifically, return on equity was 53 percent higher, return on invested capital was 66 percent higher and return on sales was 42 percent higher. Sheryl Sandberg, chief operating officer at Facebook and author of Lean In, notably remarked “If more women are in leadership roles, we'll stop assuming they shouldn't be.”
CNN also recently highlighted the performance of women who have enjoyed considerable success serving as CEO of companies. Since Marillyn Hewson was appointed CEO of defense giant Lockheed Martin in 2013, its stock has risen 23 percent. Ursula Burns, the first woman to succeed another woman as CEO of a Fortune 500 company, has guided Xerox’s stock to an increase of 24 percent. Indra Nooyi, CEO of PepsiCo – a company that generates a whopping $66 billion in sales – also saw its stock rise 24 percent in 2014.
The value extends beyond the c-suite. Research conducted by the Gallup Business Journal in 2014 found a very strong correlation between strong corporate financial performance and gender diversity. Analyzing over 800 business units of two companies from two different industries, the study showed that gender diverse units in one company had 14 percent higher average comparable revenue than business units that were less diverse. And the other company averaged 19 percent higher average quarterly profit in its more advanced gender diverse business units.
The reasoning behind these results is quite simple. Gender diversity at the board level allows for varied perspectives and more holistic viewpoints, accessing a wider range of ideas and market insight. A gender diverse workforce allows a company to more accurately reflect business trends for a customer base that is increasingly distinct, empowered and interconnected. Perhaps most importantly, gender diversity helps companies attract and retain exceptional women in a labor force where the number of women is growing exponentially.
Societal norms are changing. Women: when it’s time to negotiate, don’t apologize or limit yourself with preconceived ideas. Men: learn to communicate and advocate for the best women in your organization. If you walk into a room where everyone looks like you, change it. For a company to reach its full potential, it requires the best skills of everyone and a shared purpose with society.
To reiterate President Obama’s point, gender diversity in the corporate board room is smart, and the business case is clear. The recent law passed in Germany mandated a behavior, but if ever there was a case that doing the right thing was the right thing to do, it is the alignment between the business and societal case for gender diversity. We should strive for a time when mandates aren’t necessary to recognize talent and opportunity, but rather that having a diverse Board becomes one of those essential parts of the business strategy for smart companies who want to succeed and make a difference. The case for diversity has proven to have multiple benefits and should be important for men and women to pursue.
Margery Kraus is executive chairman of APCO Worldwide.
The views presented in this article are the author’s own and do not necessarily represent the views of any other organization.
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The Business Case for Gender Diversity on Corporate Boards
May 21, 2015
On International Women’s Day in 2013, U.S. President Barack Obama remarked that, “Empowering women isn’t just the right thing to do, it’s the smart thing to do.” Just last month Germany became the latest nation to institute a mandatory requirement for the number of women in supervisory board positions, joining such countries as Norway, Iceland, Spain, France, Italy and Belgium with boardroom quotas ranging from 30-40 percent. By comparison, currently about 19 percent of board seats at U.S. stock index companies are held by women. The numbers are moving in the right direction, and the quotas mandated throughout Europe have opened the door, but the business potential is the greatest case for gender diversity on corporate boards.
So let’s examine why, as President Obama stated above, empowering women is the smart thing to do.
Seventy two percent of respondents to a recent McKinsey survey believe there is a direct connection between a company’s gender diversity and its financial success. And a recent article in the Guardian noted that Fortune 500 companies with the highest representation of women board members achieved considerably higher financial performance compared to those with the least. Specifically, return on equity was 53 percent higher, return on invested capital was 66 percent higher and return on sales was 42 percent higher. Sheryl Sandberg, chief operating officer at Facebook and author of Lean In, notably remarked “If more women are in leadership roles, we'll stop assuming they shouldn't be.”
CNN also recently highlighted the performance of women who have enjoyed considerable success serving as CEO of companies. Since Marillyn Hewson was appointed CEO of defense giant Lockheed Martin in 2013, its stock has risen 23 percent. Ursula Burns, the first woman to succeed another woman as CEO of a Fortune 500 company, has guided Xerox’s stock to an increase of 24 percent. Indra Nooyi, CEO of PepsiCo – a company that generates a whopping $66 billion in sales – also saw its stock rise 24 percent in 2014.
The value extends beyond the c-suite. Research conducted by the Gallup Business Journal in 2014 found a very strong correlation between strong corporate financial performance and gender diversity. Analyzing over 800 business units of two companies from two different industries, the study showed that gender diverse units in one company had 14 percent higher average comparable revenue than business units that were less diverse. And the other company averaged 19 percent higher average quarterly profit in its more advanced gender diverse business units.
The reasoning behind these results is quite simple. Gender diversity at the board level allows for varied perspectives and more holistic viewpoints, accessing a wider range of ideas and market insight. A gender diverse workforce allows a company to more accurately reflect business trends for a customer base that is increasingly distinct, empowered and interconnected. Perhaps most importantly, gender diversity helps companies attract and retain exceptional women in a labor force where the number of women is growing exponentially.
Societal norms are changing. Women: when it’s time to negotiate, don’t apologize or limit yourself with preconceived ideas. Men: learn to communicate and advocate for the best women in your organization. If you walk into a room where everyone looks like you, change it. For a company to reach its full potential, it requires the best skills of everyone and a shared purpose with society.
To reiterate President Obama’s point, gender diversity in the corporate board room is smart, and the business case is clear. The recent law passed in Germany mandated a behavior, but if ever there was a case that doing the right thing was the right thing to do, it is the alignment between the business and societal case for gender diversity. We should strive for a time when mandates aren’t necessary to recognize talent and opportunity, but rather that having a diverse Board becomes one of those essential parts of the business strategy for smart companies who want to succeed and make a difference. The case for diversity has proven to have multiple benefits and should be important for men and women to pursue.
Margery Kraus is executive chairman of APCO Worldwide.
The views presented in this article are the author’s own and do not necessarily represent the views of any other organization.
