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Cover Story
As Shatter-Proof as Ever!
Women have broken a lot of Gender Barriers in Society, But The Glass ceiling is not Exactly in that List Yet
Issue Date - 17/03/2011
The Impact that Women board Directors bring on Profitability
Fortune 500 corporations, with Higher Representation of women on their boards, are already reporting greater returns on equity, sales and invested capital. No wonder that the debate has now shifted to the issue of profitability from that of diversity.

Margaret Fuller, a 19th century writer and critic, once said that the special genius of women is “to be electrical in movement, intuitive in function and spiritual in tendency.” That’s as true today as it was more than 150 years ago. I have seen how the energy, empathy and compassion of women has transformed the workplace. I have witnessed how our creativity and determination has led to unprecedented business results.

Overall, I know that women have had – and continue to have – an overwhelmingly positive influence on the business world. Now, the research evidence proving what I have known all along is adding up into an impressive body of facts.

According to a study by research firm Catalyst titled, The Bottom Line: Corporate Performance and Women’s Representation on Boards, “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”. The study also points towards a notably stronger-than-average performance at companies with three or more women board directors.

The report basically examines three critical financial measures: return on equity, return on sales and return on invested capital; and compares the performance of companies with the highest representation of women on their boards to those with the lowest representation. The report found higher financial performance for companies with higher representation of women board directors on three important parameters:

1. Return on Equity: On an average, companies with the highest percentage of women board directors outperformed those with the least by 53%.
2. Return on Sales: On an average, companies with the highest percentage of women board directors outperformed those with the least by 42%.
3. Return on Invested Capital: On an average, companies with the highest percentages of women board directors outperformed those with the least by 66%.
Clearly, companies with women on corporate boards have delivered exemplary financial performance. Smart companies appreciate the fact that diversifying their boards with women can lead to more independence, innovation, good governance and maximize the company’s performance.

A research undertaken by Prof. Alison Konrad of Richard Ivey School of Buisness (who is an expert on issues of gender and diversity at the workplace), titled Critical mass on corporate boards: Why three or more women enhance governance, highlights the critical importance of having three or more women on a board and proves that such a strategy can have significant impact on boardroom decisions and enhance corporate governance.

Specifically, having three or more women facilitates collaborative leadership which in turn benefits boardroom dynamics; helps raise important and sometimes controversial issues; brings new perspectives and issues to the table; and raises tough questions.

The study is based on interviews with women directors, CEOs and corporate secretaries from Fortune 1000 companies. It shows that while one woman can and often does make substantial contributions, and two women are generally more powerful than one, increasing the number of women to three or more enhances the likelihood that women’s voices and ideas are heard and that boardroom dynamics change substantially. 

Women who have served alone report experiences of not being listened to, being made to feel their views represent a “woman’s point of view”, and being subject to inappropriate behaviours that indicate male directors notice their gender more than their individual contributions.  Adding a second woman clearly helps. When two women sit on a board, they tend to feel more comfortable than one does alone. Two women can develop strategies for raising difficult questions in a way that makes other board members pay attention. 

The magic, however occurs when three or more women serve on a board together because no longer does any one woman represent the “women’s point of view” because each one of them express different views and sometimes disagree with each other.

Significantly better financial performance; dynamic leadership; and the ability to offer new perspectives – female leaders clearly make a refreshing, valuable and lasting difference.

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