Women in Boardrooms: Ethical and Profitable

There is no two ways about it, diversity in the workplace is essential. True equality—a basic tenet on which this country is built, second only to freedom—cannot be achieved until women receive equal representation and opportunity in our workforce.

After considering ethical responsibility, we must consider the pragmatic benefits of being inclusive to women and minorities. By limiting the participation of entire groups of people we are voluntarily denying the meaningful contributions they can make to our workforce, economy and country. 

By several accounts, management systems lacking minorities and women have achieved widespread success. But to what can this success be compared? If women and minorities have never been afforded the equal opportunity to contribute, the success of these management systems is relative to other similar management systems.

Fear to deviate from the norm, an extremely effective practice to preventing progress and innovation, is what hinders women and minorities. Why does this occur? Have minorities been proven to achieve less success in the business world? No. Women leaders are not as effective or capable as men? Wrong.

The opposite is true.

Of the limited reports on women board members, the following three illustrate the significance female leaders have in their boardrooms.

Fortune 1000

2020 Women On Boards (WOB), a national campaign with the goal of increasing the percentage of women in boardrooms to 20 percent by 2020, recently released their 2015 Gender Diversity Index (GDI) tracking the progress of women boardroom members. The index utilizes the 2010 Fortune 1000 companies—which 2020 WOB originally used when they began publishing their GDI in 2011—as well as the current firms and confirms that however slowly, progress is happening.

2020 WOB Findings:

• Women hold 18.8 percent of board seats at the original 842 active GDI companies
• The number of women boardroom members increased by 75
• 45 percent of companies have met or exceeded the 20 percent goal
• The percentage of companies without female board members decreased to 9
• More than 55 percent of companies that became inactive in the 2015 GDI either had one or zero women on their boards
• Women hold 17.9 percent of the board seats at the 960 active Fortune 1000 companies
• For the 199 companies that have joined the Fortune 1000 since 2010, the percentage of female board members is 13.5

There are two main takeaways from the 2015 GDI. The first, that women’s inclusion in Fortune 1000 companies is growing, albeit slowly; the second, that it seems companies not practicing inclusivity eventually meet a dire fate. Fortunately, for women and companies striving for longevity, inclusivity is also happening elsewhere besides America’s largest companies.

California

UC Davis’s Study of California Women Business Leaders is “an annual benchmark for gender diversity in the C-suites and boardrooms of the 400 largest public companies headquartered in California.”

In a video released with the study, Ann Huff Stevens, Interim Dean, UC Davis Graduate School of Management, states, “The study is important because it really shines a continuous light on what we all know is a concern, and that’s the lack of substantial representation of women in top leadership of the corporate sector of California and the country.”

Stevens goes on to articulate, “It’s easy to forget, I think, why at some level we would like to make sure there are a substantial number of women in these business leadership positions, but there are many reasons. We know, over and over again, that a more representative, diverse group of leaders can change the decision-making, and can improve outcomes in companies and organizations; there’s research that shows that. I think it’s also true that as the economy and the state change demographically, we need to make sure that the leadership of these companies that drive our economy represents that.”

UC Davis reveals that there is one woman for every seven men in executive leadership roles at California’s biggest companies, and that women hold 12.3 percent of board seats and highest-paid executive positions, a mild .75 percent increase from last year.

Key Study Findings:

• The number of female CEOs increased from 14 to 17, marking a 21 percent rise from last year and a 55 percent boost from 2006. These 17 female CEOs make up only 4.3 percent of the CEOs at the 400 companies.
• 11 of the report’s top 25 firms have a female CEO.
• There are 92 companies without women in director and highest-paid executive positions, a figure that is below 100 for the first time in the study’s history.
• The amount of women directors in California has increased from 8.8 percent in 2006 to 13.3 percent in 2015.
• Women hold 432 of 3,260 total board seats, 29 more than last year. The total number of board seats increased by 20 in the last year, lessening the impact of female board member growth.
• Of counties with 20 or more companies, San Francisco County has the highest percentage of women directors with 20.2 percent, Orange County has the lowest with 10.5 percent, Los Angeles County has 11.6 percent and Santa Clara County 12.7 percent.
• The majority of the companies studied lack women among their highest-paid executives. The percentage of women who are the highest-paid executives increased to 10.5 percent in 2015, up from 7.8 percent in 2007.
• Of counties with at least 20 companies, San Francisco County has the highest percentage of highest-paid executives with 15.1 percent, Alameda County has the lowest with 7.9 percent,San Diego County has 8 percent and Santa Clara County 8.6 percent.
• 70 percent of companies have zero or one woman on their boards.

Opportunity Cost

A recent study by international advisory firm Grant Thornton, Women in Business: the Value of Diversity, reveals that companies with women in executive roles outperform those with all-male boardrooms. The study analyzed S&P 500 companies from the U.S., FTSE 350 companies from the U.K. and CNX 200 companies in India on their day-to-day business operations. The report discovered that companies lacking diversity at the executive level lost out on billions of dollars in 2014.

United States

Of the 500 studied companies, 484 have women on their boards, either executives or non-executives, and 35 have diverse executive boards with at least one female executive. Companies with female executives surpassed their all-male counterparts in revenue by 1.91 percent. In total, American companies with gender diversity at the executive level generated $567 billion more than those with all-male boardrooms.

India

Indian companies with diverse boardrooms bested male-dominated companies by .85 percent. The opportunity cost for firms lacking executive gender diversity was 14 billion American dollars. One hundred seventy-six of the evaluated Indian companies have women on their boards, and 45 of them can boast diverse executive boards.

United Kingdom

In the U.K., 330 of the analyzed companies have boardrooms with women, and 47 businesses have at least one female executive. The diverse companies here exceeded firms with all-male boardrooms by .53 percent, translating to $74 billion more in revenue.

Grant Thornton’s study exemplifies the truth that while women are great executives, bringing in billions of dollars for the companies utilizing them as such, they remain disadvantaged and widely excluded from executive positions within the workplace. Some women are being given important opportunities on which they are capitalizing, but the majority of them are still overlooked.

As the studies above demonstrate, women CEOs and executives are growing, but they are still very small in number. Practicing gender diversity is an intelligent guiding principle for businesses. A diverse workforce generates more revenue while promoting equality. It’s a win-win, the nature of which businessmen are supposed to be so hungry for, so adept at recognizing. Why, then, is it so difficult and time-consuming to include women in the boardrooms and C-suites of America?

To view the original article, please see Volume 4, Issue 6 of our magazine by clicking here.