Back to the Drawing Board…

September 30, 2010 at 3:47 pm

The fact that women in the boardroom is good for business has been discussed and even proven in a variety of studies. Several years ago Catalyst Inc., a leading nonprofit working to promote more inclusive workplaces published the results of a study in which it was shown that additional women on corporate boards leads to improved financial performance for a company. More specifically, it was found that on average, companies with the highest percentages of women board directors outperformed those with the lowest; by 66% return on invested capital (ROI), 53% in return on equity (ROE) and 42% return on sales (ROS). 

If this is indeed the case and more women directors leads to better business results, why aren’t there more women in the boardroom? Depending on which source one goes to, women represent anywhere from 15% to 25% of the Director population in this country. In France we make up less than 9% and in the UK about 12%. 

To counter this matter there has been an increasing popularity in the use of quotas. For example, in 2003 Norway instituted a quota system whereby 40% of director seats were mandated to go to women for state-owned and publicly traded companies. Spain and the Netherlands have passed similar laws due to take effect in 2015 and 2016 and France is considering doing the same.

While I definitely believe that more female board directors (in fact more diversity in general) makes good business sense, I do not believe quotas are the way to achieve this goal. 

The best boards are comprised of a diverse group of senior, accomplished individuals who each bring a unique skill set and qualifications to the company at hand. That being said, these individuals need to be selected based on their experience and qualifications and not because it has been mandated as such. 

A better way to improve the situation is to go back to the source. More attention should be paid to the foundation. That is, how can the educational opportunities for girls be improved? Upon graduating how can women choose the right career track? All of this hopefully leads to the opportunity for training, coaching and eventually being promoted into the right roles. In this case the right roles are senior, preferably operational and ideally highly visible both within and outside of an organization. These factors lead to achievement of appropriate levels of seniority and ultimately consideration for director roles. 

Thus education, development and growth opportunities are the way to position people for assuming not only director positions but all leadership roles. Going to the source rather than the symptoms is really the only way to insure long-term sustainable change.

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Entry filed under: Business, Corporate Governance.

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