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A recent Catalyst study of North America’s top 500 companies showed that companies with three or more women board directors make more money. In fact, on average, companies with the highest percentage of women board directors outperformed those with the least by a 53% higher return on equity and 66% return on capital.
In a recent Lateline interview, Alison Watkins, Director of the Just Group and Woolworths, suggested that companies with women on their boards flourish because women bring different approaches to problem solving, leadership and to thinking about customers. And, so as long as women bring the requisite skills, they can only add value.
In his book “Blink”, Malcolm Gladwell explains the subtle and quick decisions that we all make due to processes of rapid cognition. He cites research on how discrimination against women and minority groups cost companies money through lost sales, lost relationships and lost opportunities. He then goes on to use the IAT test (that shows how we discriminate through the power of association) to demonstrate the subtle nature of this discrimination. In short, most of us discriminate against groups who are not seen as being powerful.
This discrimination is not logical, conscious or easy to manage – even when we don’t want to discriminate, we are often wired by society and our role models to do so. Gladwell himself is half black and yet, on completion of the IAT test, he found that he discriminated against blacks.
Gladwell cites research that illustrates that the single and most powerful way to shift discrimination is through positive role models. People only lowered their IAT discrimination score against African Americans, for example, after they had been exposed to tapes of speeches by great leaders such as Martin Luther King, Ghandi or Nelson Mandela.
By putting women on boards, we will all have positive role models of women in powerful positions. This allows women throughout the company, and all women relating to that company (suppliers, customers etc), to feel more powerful. It also encourages everybody to treat women more equitably which, Gladwell's research has shown, makes companies more money.
The trick then, is to positively discriminate in favour of women, so that at least two or three board members on each board are women. Not just any women, of course, but women with the requisite skills and at least, allied experience, who are evaluated and trained like all other board members. While this might be slightly shocking to some and considerably more work than drawing from the commonly used pool of male directors, the research is fairly impressive. Even if the figure of 53% higher return on equity is questioned, and even if we find that good companies choose to employ more women on boards (i.e. the women follow the good companies not the other way around), increasing return to shareholders while upgrading the self-esteem of women and the equity with which people across the organisation are treated, is a worthy prize.
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