Don’t go on and on. Address the gender issue effectively!

Margaret Kett of executive search specialists, Tyzack

If there is one thing female executives hate, it’s going on and on about the same thing with little sign of headway being made.

So it was in 2015, a recurring business theme that received more coverage than any other: greater gender parity in the boardroom.

Woman working - Gender Issue

I don’t want to be mendacious by implying that no progress was made – quite the opposite in fact. In 2010 women made up only 12.5 percent of the members of the corporate boards of FTSE 100 companies. By October 2015, that figure had risen to over 25 percent of FTSE 100 board members and there were no all-male boards in the FTSE 100. That’s some progress!

What I take issue with is the simple notion that having women on the board will miraculously lead to an increase in a company’s stock market valuation. McKinsey has suggested that companies in the top quartile for gender diversity are 15 percent more likely to outperform their industry peers, and Credit Suisse Research Institute has stated that diversity coincides with improved corporate financial performance and higher stock market valuations. Professional services firm Grant Thornton believes businesses with an all-male boardroom missed out on $US655 billion of investment returns in 2014. The firm’s research covered listed companies in India, the UK and the USA.

These sources are widely quoted and they sound convincing enough, until you balance these findings with other available data. For example, take the work of Dr Ian Gregory-Smith of the University of Sheffield and Professor Brian Main of the University of Edinburgh Business School. Analysing the board composition and performance of the UK’s 350 largest companies listed on the London Stock Exchange between 1996 and 2010, they found no evidence to suggest that having more women in the boardroom either increases or decreases the company’s productivity.

They were not saying that women in the boardroom can’t improve corporate performance. Their data, gathered over a 14 year period, simply showed that, amongst other things, at the board level corporate productivity neither increased nor declined by having females on the board.

I know of no female executive who wants a seat on the board of a major company just to make up the numbers. Women either want to be able to make a positive contribution or don’t bother asking them.

It seems to me that McKinsey’s and Credit Suisse’s findings may be looking at the gender issue the wrong way around. It’s not unreasonable to assume that women choose to work for successful companies and that strongly performing organisations hire more women than underperforming ones. Correlation should not be confused with causation.

Furthermore, a culture that fosters diversity may also be a reason why a company performs better. There is convincing evidence to support what is becoming an increasingly accepted fact in business: diversity is essential to growth and prosperity of any company because it breeds innovation and innovation breeds business success.

In the foreword of the recently released report ‘Women on Boards Davies Review Five Year Summary, October 2015’, Melanie Richards, Vice Chairman, KPMG in the UK, got it spot-on when she wrote: “We must continue our focus on gender and look at the true diversity of those leading our businesses. In order to remain relevant to our clients and communities, we need leaders who come from a wide range of backgrounds, each bringing different skills and views to the table, creating boardrooms that truly mirror our society.”

That’s (perhaps) a far cry from the recent appointments of 57-year-old Louise Kiesling and 34-year-old Julia Kuhn-Piëch to the supervisory board of the troubled German carmaker Volkswagen. Both are nieces of the ousted chairman, 78-year-old Ferdinand Piëch. VW hoped that including two more women (making a total of four, or 20 percent) would generate positive press for the company as the German government is pushing for 30 percent female representation on supervisory boards. And as one writer quipped, perhaps the board thought it wouldn’t get much resistance from the two women on its future strategic plans.

Both women have university degrees (Kiesling in Applied Arts and Kuhn-Piëch in Law), but with half the board seats controlled by the unions, is it cynical to suggest that these two appointments were just a box-ticking exercise?

Fortunately for UK companies, a growing number of business leaders have accepted that, in the dynamic economic environment they are operating in, leadership behaviours must change. Given that there are differences in management styles between men and women, achieving greater gender parity and developing a variety of leadership styles has become a strategic imperative.

The belief that leadership is a function that requires masculine characteristics might have been effective 50 years ago but times have changed.

The focus today should not be on forcing companies to include more women on corporate boards just to satisfy “quotas”, nor should it be based on the belief that women on the board may increase a company’s stock market valuation. The emphasis must firmly be on identifying leaders (male and female) with the right skills, temperament and experience who are capable of making a positive contribution to employee value and the improvement of shareholder value.

Address the gender balance at executive level effectively and this issue will no longer be a recurring one!

Related Posts