By Carolyn Kim Allwin and Julia Kurnik
Companies benefit financially from more gender diversity. There have been numerous studies proving this point, yet there are very few women sitting in C-suite roles, on corporate boards, or generally leading Fortune 1000 companies. Correcting this imbalance wouldn’t just boost gender equity and improve financial results, but could impact endless unintended beneficiaries.
Women improve the bottom line
Only 17.9% of directors of Fortune 1000 Companies are women. Today, out of the entire S&P 500, just 20 have female chief executives. Since 2008, though, we have learned that these results matter financially. We are no longer depending on goodwill and the quest for gender equity but urging companies to reach out to and retain women because it is good for their own bottom line.
An HBR study examining gender diversity within the C-Suite “found that going from having no women in corporate leadership to a 30% female share…translates to a 15% increase in profitability for a typical firm.” It is uncertain whether this is correlation versus causation, but when study after study finds similar results you do have to start to believe that gender diversity may actually pay financial dividends.
These results are duplicated when looking at female board directors, not just the C-Suite, underlining the importance of governance. “Fortune 500 companies with the highest representation of women board directors attained significantly higher financial performance, on average, than those with the lowest representation of women board directors.” This translated into tangible results: the companies with the highest percentage of female board directors outperformed those at the lowest end by 53% on return on equity, 42% on return on sales, and 66% on return on invested capital. Moreover, a minimum of about three female board directors was needed before these results were obtained. It’s not enough to have a token woman; there needs to be real representation.
Yet is revenue maximization the full story? Or should we examine both the dearth of women and the potential benefits of boosting their numbers through a multi-faceted outcomes perspective? Is it about more than simply the bottom line? Simply put, yes. Boosting gender diversity at all levels of the business world would not only improve profits but lead to less tangible, positive consequences across the entire stakeholder spectrum — in the workplace, at home and in the broader community.
Better for Society
When one delves into why more gender equity leads to improved financials, it becomes clear that the presence of women likely leads to other fortuitous indirect consequences. More women mean benefits to shareholders, yes, but also to investors, employees, and the broader community. More women also leads to higher social performance and social responsibility. Women who rise to the “upper echelon of corporate governance” have achieved higher education, which encourages more socially responsible decision-making.
In this decision-making, women consider the impact of their choices beyond merely the boardroom and their shareholders as they “tend to be more inclusive and ask more questions.” The greater hurdles women have to overcome in life may have a silver lining after all, ensuring that those who do obtain C-Suite positions are extremely well-qualified. Yet, we have to wonder, are we missing out on many equally talented women who were not lucky enough to have the right encouragement, see a role model at a pivotal point, or know the right person at the right time for a needed connection? More women leading Fortune 1000s not only sets a visible pathway for young girls, but may create an “old girls club,” mentoring women just starting out and providing the same boost that has long been provided to men.
Instead of simply looking at a binary response, we should be examining female inclusion through a multi-faceted impact lens. Women in greater leadership positions will not only boost profits but lead to wins for everyone: society will have more diverse, talented leaders, families will have better role models (for girls and boys), companies will have more well-rounded women for their pipelines, and media outlets will have more diverse voices in their news production. The possibilities are endless, which makes it difficult to estimate how much value will be created — but perhaps the better question is what value creation are we missing out on today by failing to empower women to our (and their) fullest potential?
Paving the path
As mothers of young daughters, our duty as moms are to be strong and independent role models who work diligently to maximize our resources and succeed to our fullest potential.
That job becomes easier if corporate America showcases successful women through high profile leadership positions. “[W]omen’s success in corporate advancement correlates with some basic building blocks: high math scores, high rates of concentration in degree programs associated with management, and liberal parental-leave policies (including paternal leave).” If girls see that their efforts and hard work can correlate with results, then maybe they will dream bigger, work harder and succeed more frequently — then maybe both our sons and daughters will “lean in.”
With more female role models, women and girls will benefit from mentors to guide their dreams and to help them clarify their ideals. It’s one thing to tell a young girl she can do anything — it is another to point to someone who has, to let her see, day in and day out, that there are pathways available and that not everything has to be a hurdle. We don’t expect to see as many women as men in the near future, but perhaps our young daughters will see as many female as male role models in management. Perhaps they will never question if all avenues are open. Perhaps, like men today, they will never question if a path is available or even what that path should look like.
An Elysian Vision
It is a beautiful thought — an Elysian vision, in fact, but we are not there yet. Today, by not engaging and fostering female leadership we are not just abandoning additional revenue opportunities, but we are also missing out on significant value creation. This isn’t just true within the business world of large corporations, but within our governments, small businesses, local communities, schools and homes. From additional worker productivity to greater inclusivity to higher social engagement, we cannot even begin to quantify the value creation we are throwing away. Tomorrow’s Nobel Prize winners of chemistry and physics may not be studying science because they, as girls, have never been encouraged to do so nor did they believe they had the “intrinsic aptitude,” as Larry Summers suggested while President of Harvard.
Three days ago, more than one million people rallied worldwide at women’s marches. The power and influence of women is evident. Perhaps, as just one small piece of that effort, we should harness our voices into a coherent message and ask if we, as a country, can afford to risk leaving additional value, financial and social, on the table for our daughters’ daughters to inherit.