Following on from our article in the March newsletter “Gender and Diversity in the Boardroom” where we revealed that female directors constitute a relatively small proportion of all directors, we have expanded our research to study the repercussions for organisations with women directors.
A report by McKinsey and Company1 discussed how having women board and executive members could be beneficial to an organisation performance by addressing key talent shortage, rising importance of women in consumer base sectors even in industries with male dominated buyers and by linking employee diversity to employee motivation. These hypotheses were validated by empirical studies showing higher operating margins, market capitalisation, Return On Equity (ROE) and share price growth. It also demonstrated that in order to be materialistically different, there had to be at least 3 women members in a board of 10 members.
Another recent report2 revealed that female executives sometimes receive 22% less base pay compared to their male counterparts citing discrimination, family commitment and occupational segregation to be most prominent reasons. Additionally, the McKinsey report also adds that low ambition and a difficulty in identifying a role model as significant barriers preventing women from achieving senior executive positions.
To improve organisation performance and thereby improve board diversity, the concluding section of the McKinsey report recommends four gender diversity initiatives:
- Implementing gender based KPIs
- Facilitate work life balance
- Adapt human resource management systems
- Help women nurture their ambitions