Do women at C-level make businesses more profitable?

10 Feb 2016356 Shares

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A new report into businesses all over the world has found that the more female C-level executives you have, the higher your profit is.

The Peterson Institute’s latest piece of research into gender diversity in management positions claims that a business having 30pc of females in leadership positions results in 6pc higher profits.

The study looked at almost 22,000 companies around the world, finding that CEO or director-level females make little impact on the bottom line, but when it comes to C-level generally, it’s all profit.

Of all the businesses checked out, nearly one-third have no women in either board or C-level positions, 60pc have no female board members, 50pc have no female top executives, and less than 5pc have a female CEO.

Substantial benefits

The correlation between C-level female participation and better profits “is demonstrated repeatedly”, according to the report.

“The impact of having more women in senior leadership on net margin, when a third of companies studied do not, begs the question of what would be the global economic impact if more women rose in the ranks,” said Stephen R Howe Jr of EY, which also helped with the study.

“The research demonstrates that while increasing the number of women directors and CEOs is important, growing the percentage of female leaders in the C-suite would likely benefit the bottom line even more.”

The country with the highest level of female participation in leadership positions is Norway, according to the report, with 40pc of women on boards. The lowest is 4pc in Mexico. Note that even at the highest, parity is not achieved.

Quotas

Actually, the Norwegian example is interesting, notably as it has a board quota system, as Peterson’s Marcus Noland and Tyler Moran explained.

“Our study found that having women on a board was statistically correlated with having more women in the C-suite,” they wrote.

“So if the presence of women on boards has a pipeline effect by encouraging more women to pursue senior executive positions, a quota system may warrant consideration, particularly if increased gender diversity in corporate leadership contributes to firm performance.”

However, quotas, despite a remarkable example of temporary quotas in the Netherlands making plenty of sense, are not recommended by the study. Rather, helping women “in the middle of their careers”, is.

Profit

The financial, healthcare, utility and telecommunications sectors appear to have greater numbers of female executives and board members – that’s pretty much four of the most profitable sectors in the world.

The report looked at far more than just female representation, though, finding that paternity leave is far more common in companies with a more-balanced make-up.

Weirdly, the research also found that mandated maternity leave alone is not correlated with increased female corporate leadership shares, though paternity leave is.

“If these correlations are interpreted causally, one could argue that countries in which fathers have access to more leave have significantly more women on corporate boards,” according to the study.

“It stands to reason that policies that allow childcare needs to be met but do not place the burden of care explicitly on women increase the chances that women can build the business acumen and professional contacts necessary to qualify for a corporate board.”

Women Invent is Silicon Republic’s campaign to champion the role of women in science, technology, engineering and maths. It has been running since March 2013, and is kindly supported by Intel, Open Eir (formerly Eircom Wholesale), Fidelity Investments, Accenture and CoderDojo.

Board meeting image via Shutterstock

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Gordon Hunt is a journalist at Siliconrepublic.com

editorial@siliconrepublic.com