Do women add value on boards?

Not everyone thinks so, yet the evidence has never been stronger.

**Two new pieces of research and a real-life example from September 2019**

Women account for 50% of the population so it should be hard for anyone to argue that the female view in the boardroom is not required as an input into a company’s strategy or governance oversight.

But all too often those in the boardroom arguing for diversity of thought, with regard to gender diversity, hear that what is really important are the skills. After all, there’s nothing gender-specific about governance skills and strategy so why should the recruitment prioritise a gender balance over skills?

Thankfully, it's now not hard to counter this argument, given the significant body of research which shows that mixed-gender boards lead to better business outcomes. And the evidence keeps on mounting, with some significant additions this September.  

The Harvard Business Review reported on an academic data analysis of listed US firms where researchers looked to see if there was any relationship between having female NEDs and the confidence level of the CEO. They tracked whether a CEO has been 'over-confident' in the business, not by how they ran the company but by their personal choices around their share options. The researchers found that women on the board as non-executives tempered the over-confidence of CEOs,  improving overall share-holder value. They also found having a gender-mix on the board improved the performance of financial services firms, in particular during the financial crisis. 

But is this research relevant to the UK, and to smaller companies? Our own CEO Fiona Hathorn's experience from the boardroom and other stories from Women on Boards UK members suggest that it is. And a smaller scale study, published this September by insolvency practitioners KSA Group, supports this view. The study looked at the board composition of UK SMEs going through insolvency. The key finding showed companies with all male boards have a 49% high insolvency rate than those with a mix of genders on their board.

Some might still want to argue that the lack of gender was not the real cause of over confident CEO’s or higher insolvency rates, but it is now looking increasingly likely that gender diversity does enhance performance of companies, both profits and share returns. A view aided further by the now infamous Credit Suisse Gender 3000 ‘The Reward for Change’ 2016 research.

But are there any clear examples of over-confidence and/or risk-taking by male CEOs with all male boards actually playing out currently? Let’s have a look at the big business news story of September:  WeWork’s IPO.  The global coworking space firm filed its intention to IPO in August with a valuation of £47billion. By mid-September, this valuation had been reduced to £10billion; the IPO delayed indefinitely; and ‘a few thousand’ redundancies planned. During this four-week period, a wide range of concerns came to light about the male-CEO (who has since left the role) and the company more generally - which had an all-male board until very recently.

So why might women temper the confidence levels of male dominated boards and male CEO? Fiona Hathorn Women on Boards UK’s CEO believes the reason that boards with more women on them make better risk-adjusted decisions is because “these boards are less cosy and thus the decision making process is more robust, aided by the fact that it is more likely that the board did not go to the same school and/or are not currently golfing together”.  

The long and the short of it is that diverse boards are likely to have better scrutiny and a proper process for decision making. As the researchers in the Harvard Business Review phrase it, “research has found female directors tend to be less conformist and more likely to express their independent views than male directors, because they do not belong to old-boy networks.”

So when suggesting diversity is prioritised in a recruitment process, please do hold firm and question your board if the recruitment process, and/or head hunter, consistently returns candidates who appear to be all cut from the same cloth. There is no question that skills audits are needed but does focusing only on skills and not gender work? We think not.  

>> Visit our Voice for Women Resources for more on the research supporting the need for diversity in the boardroom. 

written by Gail Emerson, Marketing and Content Manager