This post was originally posted on the Huffington Post.
In the 25 years I’ve worked as an international business coach, I’ve witnessed business leaders suffer from the same blind spot — not enough women on their boards. Companies where at least 20 percent of seats in the boardroom are occupied by women deliver stronger business results. How could this success possibly be ignored and not acted upon?
While politicians and economists in the U.S. argue over how to “fix” the economy, research gives them at least part of the answer. A report from Catalyst, Why Diversity Matters confirms an astonishing fact that U.S. companies persist on ignoring: organizations with a better gender balance at board level enjoy a 42 percent higher return on sales, a 66 percent higher return on invested capital, and a 53 percent higher return on equity than their rivals. McKinsey Consultants, WomenMatter2012 confirmed this link between the proportion of women on executive committees and better corporate performance.
I’ve seen how gender diverse boards also show improved performance on corporate and social governance and lower relative debt levels — attractive to investors. They tend to be appropriately risk averse, avoiding irresponsible decisions. Remember, that in 2008 entire businesses collapsed because of unchecked greed-driven trading in unsafe securities in the financial markets. Elizabeth Warren, the new “Sheriff of Wall Street” claimed, “It was this very recklessness which caused the economic meltdown in the first place.”
Why do women at the top have such a convincing impact on all round performance? For one thing, a gender-balanced executive team can be closer to its customers. Globally, women control about $20 trillionof consumer spending. No wonder that women are more likely than men to target alternative customer segments, or discover innovative ways to sell their products and services. Laughter broke out when, in a recent meeting with MBA students, the CEO of a retail jewelry chain commented, “that only men buy diamonds,” as the reason for his all male board. Undoubtedly, he is out of touch with his large female customer base.
Board reviews I’ve conducted for clients have shown that gender diversity creates a forum for different views and ways of thinking, allowing companies to improve how they identify and address issues, solve problems and make decisions. This translates directly into stronger financial performance.
Women leaders should be playing a critical role in getting us back on that strong fiscal track. Norwegian companies where I’ve worked have learned how to be more gender inclusive — in some instances 40 percent of board seats are occupied by women. Yet here in the U.S., there is a dearth of female board members, with only 13.6 percent of corporate board seats in Fortune 1000 companies held by women, increasing marginally (by 0.5 percentage points) in 2009-2011, well below figures for Nordic countries, Canada, Australia and France. Internationally the U.S. ranks 9th out of 45 countries in its percentage of female corporate board members despite the fact that 46 percent of the U.S. workforce and over half of managers are women.
My clients tell me that gender equality hits a brick wall in boardrooms. With such high correlations between financial performance and the percentage of women on boards, I’ve often wondered why so few CEOs are bothered by this?
Several reasons have been cited as to why — ranging from negative stereotypical attitudes of the predominantly male board toward women, to blaming women themselves for showing a greater distaste for office politics. Facebook’s COO Sheryl Sandberg’s suggests that women pull back when they should be “Leaning In.”
Clearly, something is going wrong at multiple levels. For example, another dismal fact is that women are still paid less than men at every educational level and in every job category. And compared to the rest of the developed and still developing economies, American women’s maternity leave is paltry.
Whatever the reasons, it remains difficult for many talented women to get a seat at the top table. It’s now time to move from the “why” to the “how” and shift gears if we want to prosper and continue to grow. Thomas Carlyle, the Scottish philosopher, claimed, “No pressure, no diamonds.” Shareholders, consumers and staff ought to lobby for gender diverse boards. Pension funds and other institutions should continue to demand that companies place gender equality on board positions firmly on the strategic agenda — not just talk about it, but show results. The pressure to get more women in the boardroom needs to rise. That way we’ll get the sparkle back into the economy.
Susan Bloch is an SVP Partner, global leadership coach, and author at KRW International. This is the first of a series of blog posts about women and business, published on the Huffington Post.