Much of the current discourse on equality and empowerment positions women and girls largely as beneficiaries of the Sustainable Development Goals (SDGs). However, the achievement of Goal 5 (Gender Equality) alone will not create a gender-equal world, says the report Women Leading the World to 2030 by the Business and Sustainable Development Commission. Women on corporate boards play a powerful and indispensable role in driving progress towards achieving the SDGs.
Gender-balanced leadership in India will provide a significant opportunity to help drive forward the change in perspective needed to reach the future we want by 2030. Here are 7 reasons companies should consider having more women on corporate boards.
1. Companies with Women on Corporate Boards Perform Better
The correlation between women in C-level executive ranks and positive corporate performance has been demonstrated repeatedly. Several studies of women on corporate boards examining Fortune 500 and 1,000 companies, and a larger sample of US and European corporations, revealed how businesses with increased proportions of women executives and directors performed better.
These firms around the world demonstrated an average increase in return on equity of 53%, as well as 42% higher profits and 66% higher returns on invested capital. One study found that having a minimum of three women on the board offered the best results.
A board or C-suite made up of 30% women could boost profitability by 15% compared with companies with no women in leadership, and secure a net profit increase for both profitable and unprofitable firms of 6 percentage points. Another study found a 20% lower bankruptcy rate for businesses with at least one woman on the board.
2. New perspectives to pursue future growth
Women leaders may provide a new perspective to decision-making. With more women in upper-management positions, research suggests that businesses can shift from short-term profit maximisation to a broader focus on longer-term goals. Boards that include women are more likely to make decisions that result in large but delayed rewards, and to favour compensation tied to long-term success.
For example, in Norway, when the share of corporate directorships held by women doubled from 18% to 40% by 2009, short-run corporate profitability declined by about 4 percentage points as a result of fewer layoffs and higher relative employment. However, these firms did not experience reduced profitability when they were reviewed more than three years later.
3. Women leaders drive innovation capacity
An increase in the number of women on managerial teams has shown to boost the innovation capacity of their companies, especially when tackling complex issues. There is considerable evidence that women identify the critical new technologies, business models, new products, and services to meet consumer needs while also solving societal problems. Women in top management positions in India will be key to leading more knowledge- and innovation-driven businesses and delivering the speed and scale of innovation necessary to achieve the 2030 SDGs.
4. They collaborate to create partnerships
A significant review of the existing research found that women in corporate boards were collaborative and ready to engage in consensus-building. Women directors also tend to engage effectively with the difficult, multi-faceted situations and social issues that increasingly confront companies today. They take an inclusive and co-operative approach to decision-making, spending time to find the ideal solution, and are skilled at balancing multiple stakeholders’ interests to reach decisions that benefit all parties.
5. They drive transparency to improve corporate governance
Companies with more women on the board of directors tend to have greater transparency and better corporate governance. Women lead companies to behave more ethically and engage in fewer bad business practices. They also institute strong governance structures, increase efforts to monitor management and demonstrate high levels of disclosure and transparency. Women leaders uphold ethical business practices and instil programmes, guidelines, and clear policies to stamp out corrupt business dealings. Companies with women executives experience fewer large-scale controversies.
6. Champion sound environmental management
Female company directors have been shown to prioritise environmental issues, taking proactive steps to manage and improve the energy-efficiency of their company’s operations and address the environmental risks in their business decisions. Companies with women on their boards are more likely to measure their products’ carbon emissions and to implement programmes with suppliers to decrease the carbon footprint throughout the value chain. They integrate climate change impacts into their actuarial models while developing products to help customers manage related risks.
They also try to anticipate environmental regulations and proactively work to change consumer demand. The more gender-balanced an executive team, the more likely the company is to invest in renewable power generation, low-carbon products, and energy efficiency.
7. Female directors encourage social inclusion
There are multiple indications that women leaders show concern for others’ welfare, resulting in increased positive social outcomes. Employees of companies with women on corporate boards have better working conditions and offer strong benefits. Women leaders tend to proactively provide professional development opportunities and formalised training programmes to their employees. When a number of women are on the board, the gender wage gap is smaller, and female labour participation in the company increases. Women executives also give higher priority to social issues outside the business, taking into account the welfare of their employees’ families and the community, and being aware of consumers’ needs.
This article is part of a series on women leaders driving the SDGs (Sustainable Development Goals)