Corporate Boards 103: Gender Diversity and The Nation
Last week, I examined the makeup and duties of corporate board members. This information is important to understand because it explains one reason why 2020 Women on Boards is working hard to fulfill its mission to raise the percentage of women who serve on corporate boards in the U.S. to 20% or greater by 2020. However, there is a second and just as important reason to examine as to why diversity on corporate boards is so important.
FIRST REASON WHY BOARD GENDER DIVERSITY IS IMPORTANT:
Over the years, diversity has become an increasingly topical issue, especially about how diversity positively impacts our communities and the workplace. Diversity is undoubtedly a topic that makes people think, where people may have differing ideas of thought about what diversity means to them. Diversity can cover many dimensions, including gender diversity, but ultimately diversity encompasses acceptance and respect of everyone.
Diversity is about understanding each other and moving beyond just tolerating each other’s differences. It is vital to support and protect diversity because by valuing individuals and groups without prejudice, you help to foster a climate where equality and mutual respect are intrinsic.
SECOND REASON WHY BOARD GENDER DIVERSITY IS IMPORTANT:
Since this series of posts center on 2020 Women on Board’s ties to gender diversity on corporate boards, I will further examine the correlation of female representation on corporate boards to organizational success. In this realm, the topic of diversity shifts away from fairness and equality to how a diverse corporate board leads to outstanding corporate performance.
Studies by McKinsey and Catalyst have shown how corporate performance benefits when there is a diverse representation of board members. For example, Catalyst concludes that Fortune 500 companies with more women on their boards tend to be more profitable, while McKinsey’s study illustrates how companies with a higher proportion of female board members typically exhibited a higher degree of organization, above-average operating margins, and higher valuations.
Indeed, these findings suggest organizations with a diverse corporate board experience greater success than those who don’t. While Catalyst and McKinsey’s studies concluded that companies tend to be more profitable when there is diversity among its board members, I dug around to see if there is any data to support this claim. Indeed, there is. A Sussie report assessed the impact of female board representation on large-cap stocks (market cap greater than USD 10 billion), and the companies with female board members outperformed those whose corporate boards were composed only of men by 26% over the past six years. For small-to-mid cap stocks, organizations with women on the board outperformed those without by 17% over the same period.
When you realize that the decisions boards of directors make can impact, you, your community, and the country, it’s crystal clear why 2020 Women on Boards is committed to raising the percentage of women on corporate boards. Plus, good corporate decision making depends on thinking more critically and listening to different points of view, which are by-products of having people with different backgrounds, perspectives, and experiences on corporate boards.
So, why are the numbers of women on corporate boards still significantly lower than men? Even with these advantages of having a diverse corporate board in an organization, there is the counterargument that gender diversity can lead to conflict and dissent among the board members, which can negatively impact their decision making. But the problem with homogeneous groups is that they will be more susceptible to groupthink, and that can have serious consequences to the organization.
My next post will examine the psychological phenomenon groupthink and how it affects decision making in groups. Additionally, I will investigate how groupthink can affect the outcome of corporate board decisions and how it influences their thinking.
Christine Krause is a marketing team member for the 2020 Women on Boards 8th Annual Conversation on Board Diversity – Chicago. This series, Corporate Boards 101, will highlight her experience and learnings as a newcomer to the important work of board diversity.
