The report Women in the Boardroom, conducted by the firm Deloitte, established that women only fill 16.9% of the executive positions in the world and estimates that it will take thirty years for the ratio to even out.

The majority of reports and press articles on the subject focus on the analysis from an ethical point of view. They portray the increase in the ratio of women holding senior positions as an end in itself and only rarely discuss the question of the effective conditions in which women perform their jobs while ignoring the subject of possible effects on performance.

A recent study, based on a sample of American companies from 1998 to 2011, has further showed that the drop in stock value over the two-year period following the appointment of a woman to the executive board can be explained as an interpretation made by investors. According to them, this kind of appointment was seen as the prioritising social objectives to the detriment of stock value maximisation.

Therefore, it’s only when companies and their stockholders are convinced that they can expect a positive outcome on financial, economic and stock performance that more women will be given opportunities to sit on executive boards.

Rethinking the role of women

More than twenty years ago, Karen J. Curtis, executive vice-president of Bank of America, explained it in these terms:

“There is a real debate between those who think that we should be more diversified because it’s the right thing to do and those who think that we should be more diversified because it will drive a real increase in stock value. If we do not convey and employ the second point of view and if people believe it, it will only amount to tokenism (symbolic efforts).

But the only measures currently adopted by the authorities to increase the representation of women are the establishment of quotas or the introduction of recommendations in the codes of national governance.

Clearly these measures contribute to limiting the discriminatory treatment of women, particularly in companies where there is major cultural resistance, but they do not guarantee that women, once they are appointed, effectively participate in making decisions.

Even if the characteristics commonly attributed to women are widely agreed upon, the results of empirical studies looking into the effect on performance when women are present in executive management remain contradictory.

We interpret this ambiguity by the fact that there is no intrinsic impact on performance because the presence of women does not mean they are truly represented, which the quantitative studies assume.

For this perspective we look to the recent study that we conducted based on a sample of 1,986 companies in twenty-five countries over the last twelve years.

We have shown that the relationship between the presence of women in the boardroom and performance depends on the country’s socio-cultural context, with one of its manifestations being gender equality. Our measurement of gender equality covers access to healthcare, politics, business, the working world and education, as well as the equality of treatment by the legal system (through divorce and inheritance laws).

The importance of gender equality

The study showed us that gender equality amplifies the positive impact that women have on economic and financial performance. In fact, when women are given a voice and their presence comes with real representation, the diversity of approaches that they bring to the executive board is likely to improve decision-making quality.

In Sweden, the appointment of a woman to the executive board brings with it an increase in economic and stock performance equivalent to four times that of countries where gender equality is at the median level (France and Australia). In China, Japan, Thailand and India, where gender equality is lower, the impact is either negligible or negative.

Furthermore, with regards to executive management oversight, we observed that only in companies with the greatest equality does the presence of women show a lower likelihood of account manipulation, in keeping with a more refined sense of ethics that is commonly attributed to women. Increased quality regarding financial information provides increased transparency for shareholders, which improves their control over managerial decisions and their financial consequences.

It has also been found in companies where gender equality is most widespread that the presence of women is linked to a lower tendency of taking excessive risks. This is connected in particular to the “empire building” behaviour on the part of managers preoccupied with making the company grow and their personal benefits to the detriment of value creation.

Promoting equality for greater effectiveness

In all, the most effective and lasting method for authorities to bring about better representation of women in top management would be to promote equal treatment between men and women in the company.

It’s only when women have the same access to education and the business world as men do and are not left to take on all the family obligations that they will be able to develop expertise, make the most of professional opportunities and construct a social network in order to enjoy credibility on the same level as their male colleagues, which is vital for influencing decisions in the boardroom.

Without this equality, women will just be tokens of diversity whose presence will only be used for the purpose of ensuring that companies comply with regulatory requirements. It is therefore in a company’s interest to appoint women who have technical skills and the necessary social capital for their consulting duties (without preferential treatment in contrast with men), which allows them to weigh in on decisions at the same level as their male colleagues.

Companies would benefit from this through increased effectiveness in executive management in both its advisory capacity and in the oversight of managerial actions, in keeping with the objective of maximising stock value and in accordance with an ethical outlook enabling equity to prevail over equality.

Translated from the article published in French in The Conversation France on November 8, 2020: « Femmes dans les conseils d’administration : le contexte socio-culturel compte plus que les quotas »