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Why your business needs to speed up gender diversity on the board

Posted by Neha De

April 6, 2022    |     2-minute read (400 words)

According to Deloitte’s Women in the Boardroom: A Global Perspective report, women hold just 6.7% of board chair positions and 5% of CEO roles globally. This is despite the fact that businesses with “boards with multi-dimensional diversity experienced less downside and even revenue growth throughout the pandemic.” In particular, companies with more than 30% of board seats held by women outperformed their less gender-diverse counterparts, research shows. 

There are many advantages to increasing diversity of boards. Let’s look at five top reasons: 

1. Businesses with more women on their board experience significant financial performance – Research from Catalyst shows that “companies with the highest representation of women on their top management teams experienced better financial performance than companies with the lowest women’s representation.” This holds true for both financial measures analyzed: return on equity, which is 35% higher, and total return to shareholders, which is 34% higher.

2. Female board directors add a new range of skills – Apart from the obvious diversity in background, female directors contribute to boards by offering specific functional expertise. This expertise increases board heterogeneity, which can increase firm value, study shows.

Another benefit of having female directors is better monitoring and oversight ability, according to a study of nearly 400 organizations.

3. Women leaders de-risk company performance – Female directors do not just improve financial performance metrics; they de-risk company performance by lowering reputational scandals and the likelihood of lawsuits and corporate crime, as well as improving CSR (corporate social responsibility) and ESG (environmental, social and corporate governance) by reducing the chance of environmental infringements and so on.

Further, businesses with more women members on their board of directors are more likely to disclose their greenhouse emissions, according to a study.

4. Women leaders showcase higher levels of integrity – Women are less likely to be corrupt than men, according to The Economist. Few traits are as vital to leadership potential as integrity, because power corrupts and toxic leaders destroy teams, companies and even countries. 

5. Companies with more female board members tend to invest more in innovation – A study from the Journal of Empirical Finance shows that “female board representation is positively associated with performance only for firms for which innovation and creativity play a particularly important role.” In fact, an increase of 10% in female representation on boards was associated with an increase of 7% in citations and 6% in innovation patents.  

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