Opinion by Thought Leaders
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How Women Bring More Value to the Boardroom

 

Diversity in the boardroom: it's a critical factor in the growth, ingenuity and success of today's businesses. But what is it? How exactly do women in authoritative positions add value to the bottom line? Gender diversity invokes a multitude of perspectives on how companies can solve problems more efficiently. It makes sense, then, that companies with more women on their boards are setting the tone for a much more inclusive workplace culture through all levels of the organization.

The Numbers

It used to be that this "boys' club" mentality viewed women in the boardroom only as a way to appease and placate. This viewpoint is an archaic one that hasn't just evolved over the decades because women have worked hard to prove their worth (although this is certainly true) -- it has evolved to become the status quo because women in the boardroom get results. Quantifiable results. The numbers don't lie.

  • Companies with at least three female board members enjoy a median productivity of 1.2 percent above competitors, says Forbes.

  • Gender diversity on management boards has a significant impact on productivity growth and on returns to investors.

  • One recent study of more than 1,000 leading firms across several countries and industries revealed that gender diversity resulted in more productive companies, as measured by revenue and market value, according to the Harvard Business Review.

  • The Credit Suisse Research Institute (CSRI) detected a link between firms with more female leaders and stronger share price performance over time. The report revealed that companies with more than 20 percent female managers had out-performed those with less than 15 percent female managers by five percent.

These numbers all look good. And yet, not even 17 percent of women worldwide fill board seats and not even five percent fill CEO roles, suggesting that females still have a long road to walk to achieve parity with men in the boardroom. Women have been soaring to the top in established professions such as medicine, banking and law, taking top spots at GM and IBM. But there's still a big gap when it comes to women on corporate boards. In fact, men hold about 80 percent of all board seats for companies in the S&P 500 stock index, according to Bloomberg. Even more concerning is that growth in female representation on such boards has slowed.

The Female Value: Productivity

It seems females are in the driver's seat when it comes to getting the job done. Studies have shown that companies that strive to incorporate a greater gender balance enjoy stronger corporate results. A report from MSCI revealed that having women on boards boosts corporate productivity. And a McKinsey report showed that organizations with the most gender-diverse teams at the executive level are 21 percent more likely to do better in regards to profitability.

Research from the International Monetary Fund (IMF) also shows a link between productivity and gender diversity, whereby women and men complement each other throughout the production process. The Peterson Institute for International Economics performed a study that says employing women at C-Suite levels significantly increases net margins.

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What Do Boards Really Want From CEOs?

 

Designating the right person to lead a company in the CEO position is perhaps one of the most critical roles of a board of directors. Second most important is monitoring that leader's performance on an ongoing basis to ensure consistency. The right CEO, says Forbes, is someone who can assist the board in developing and implementing strategic and business objectives while driving performance to achieve those objectives in a sustainable way. At the heart of it all is collaboration. No board wants to hire a CEO that goes his or her own way, with little input from others as to which direction to take the company. Rather, the ideal situation is when both parties work in conjunction to stay the course.

This doesn't mean there aren't clear roles between the two. By nature, a CEO's role is to manage, while the board's role is to govern. Board members also known as directors, are elected by the corporation's shareholders. Their role is to provide guidance and strategic planning to the company’s top officers, who are often busy running the daily operations of the business. Another main role is to hire, oversee and, if necessary, fire the company’s top officers, including the CEO.

The CEO's role is to determine and communicate the organization’s strategic direction, balance resources (capital and people), foster the corporate culture consistently, make the final call on all decisions, and oversee and deliver the company's performance, points out Entrepreneur.

What's the connection between the two entities?

Built on a foundation of trust and honesty, boards expect their CEOs to achieve two things: apply skills, industry knowledge and experience to fulfill company objectives; and commit to an open yet constructive relationship with the board. These objectives are all well and good, but how can they be quantified? What happens during the scouting, recruiting and hiring process whereby a board decides on the ideal candidate?

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