An internet search for another document led to the discovery of a recent working paper from the Peterson Institute for International Economics (PIIE) that addresses the relative global absence of women on corporate executive boards and at the upper levels of management. It is based on a 2014 survey conducted by PIIE and data sampling of 21,980 firms in 91 countries. It is important to note that the United States is not included in the list of countries that were sampled.
As we round out Women’s History Month, I’m providing a summary of some of the survey’s findings:
- Nearly 60% (13,017 firms) have no female board members.
- Just over 50% (11,802 firms) have no female “C-suite” executives (a firm’s most senior executives and members of corporate boards).
- Of the remaining firms in the bullet above, 57% have only one (1) female executive.
- Less than 5% (945 firm) have a female chief executive officer (CEO).
- Roughly 1/3 (33%) have no women in either C-level or board positions.
- Eleven (11 firms) have all executives and all board members are women.
- Intraregional variation is significant, e.g. share of female executives ranging from 2.5 percent in Japan to 13.5 percent in China.
- Some countries have legislated a corporate board quota: Norway is best known, with a 40% gender quota for state-owned and, as of 2008, public limited companies. Denmark and Finland impose quotas on female representation for boards of majority state-owned agencies. To date only Norway and Iceland have applied their complete quota instrument to publicly listed companies. The two countries have the highest female board representation, at 40% and 51%, respectively.
- France implemented a 20% quota in 2014, half of the 40% quota that will become binding in 2017.
The data reveal considerable variation in female representation across regions and countries as well as sectors of the economy.
Figures 2 and 3 of the cited source illustrate women’s representation on corporate boards and C-level positions for all countries in which 10 or more firms in the dataset are headquartered. The maps show that there is a relationship between gender balance and per capita income, however, the correlation is far from perfect. In East Asia, for example, where per capita income is relatively high, women hold only 6 percent of board positions and just 3 percent of board chairs.
Another important finding of the data analysis revealed that the CEO’s gender does not have a significant impact on firm profitability, when controlling for gender balance elsewhere in the firm. The results do not suggest that female CEOs tend to outperform their male counterparts. Instead, the benefits of female leadership participation appear to be show that a more diverse leadership team tends to deliver better outcomes.
Consistent with other research, there is no evidence that board quotas have any significant impact, positive or negative, on company performance. One concern about the quota system is that in a system with few qualified women, a small number of women will be invited to sit on the boards of many companies, a phenomenon known as the golden skirt effect, and their over commitment will have a negative impact on monitoring activities.
However, the data indicate that golden skirts are no more prevalent than golden pants: 13% of male board members sit on two boards, compared with 12% of women board members, 3% of each gender sit on three (3) boards at the same time, and 1% of male and 0.8% of female board members sit on four or more boards.
The data suggest a pattern of results that lead to a “pipeline” interpretation of the effect of gender diversity. There is no statistically observable impact of having a female CEO, and the impact of women’s presence on the board is not statistically robust. However, the correlation between women at the C-suite level and firm profitability is demonstrated repeatedly, and the magnitude of the estimated effects is not small.
For example, a profitable firm at which 30% of leaders are women could expect to add more than 1% point to its net margin compared with an otherwise similar firm with no female leaders. By way of comparison, the typical profitable firm in our sample had a net profit margin of 6.4%, so a 1% point increase represents a 15 percent boost to profitability.
When considering a broader set of firms, both profitable and unprofitable, the result is even more striking. For the sample as a whole, the firm with more women can expect a 6% point increase in net profit, while overall median net profit was just over 3%.
The results suggest that the presence of women on corporate boards and in the C-suite may contribute to firm performance. The impact is greatest for female executive shares, followed by female board shares; the presence of female CEOs has no noticeable effect. This pattern underscores the importance of creating a pipeline of female managers and not simply getting women to the very top.
Based on the above information, most of us would expect to find more not fewer women in management and board positions for most firms? After all, it is 2016! However, it should be noted that one of the shortcomings cited in this work is the limit of a single year’s (2014) worth of data in providing meaningful analysis. As the authors of this report suggest, “The survey represents a snapshot; the results should therefore be interpreted cautiously.”
Source Cited – WP16: Is Gender Diversity Profitable? Evidence from a Global Survey, by Marcus Noland, Tyler Moran, and Barbara Kotschwar, Peterson Institute for International Economics, February 3, 2016