Opinion

Women leaders mean more profits

JINOY JOSE P | Updated on January 20, 2018 Published on February 10, 2016

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What? You’re not talking about Indian companies, surely?

Well, then it’s time they all listened in. A new study says if companies want to make more money, all they have to do is to follow a gender-diverse leadership. The more women you have at the top, the richer your coffers get; it’s as simple as that.

Who’s done the math here?

The Peterson Institute for International Economics, a nonprofit organisation in the US, and global consultancy EY. Their study of 21,980 publicly traded firms in more than 90 countries has found that having women in the highest corporate offices is linked with increased profitability.

Of course, this is not the first study to say this, but its sample size is quite mammoth in comparison with other similar studies. The study has found that, unfortunately, nearly 60 per cent of the companies reviewed did not have female members on their board. Further, more than 50 per cent had no female executives at all. Just under 5 per cent had a female chief executive.

No surprises there, given how all-male our business world is

Yeah. But what’s surprising, the study says, is that many corporations are not ready to introduce measures to enhance gender diversity despite the apparent economic benefits attached to it.

But the talk is women CEOs underperform!

That’s more to do with prejudice than proof. The current study found that female CEOs did not significantly underperform or overperform when compared with their male peers.

The researchers behind the study say an increase in the share of women from zero to 30 per cent can help the firm enhance profitability 15 per cent with no sweat. If you remember, just last year a study by McKinsey Global Institute estimated that if women could achieve complete gender parity with men, it could help increase global output by more than one-quarter from now.

But how do you crack the gender diversity in business leadership issue?

Let’s admit first that the likes of Marissa Mayer, Sheryl Sandberg or Indra Nooyi are more exceptions than the rule. The study says a lot needs to be done to achieve gender diversity at top echelons of the corporate world. Yes, to start with, companies have to be sensitised about the benefits. Also, we need to establish a management pipeline of women as early as childhood.

How?

See, in the US where we have Mayers and Sandbergs, women make up only 40 per cent of MBA graduates and 40 per cent of managers. So you can imagine the state countries like India are in. The team that conducted the Peterson Institute study feels we must build an ecosystem where female leadership skills are nurtured early on to fill the skill-shortage.

Will reservation help?

Interestingly, the study did not find evidence that quotas for women on boards – mandatory in countries such as Norway, Denmark, Finland and now India – were influencing bottom lines. One reason for this is the ‘golden skirt effect’.

This means a small number of women sit on boards of several companies and perform worse as they are overcommitted. But of course, lenient organisational policies, strong maternity benefits, sensitive approach to work-life-balance can all work wonders.

So India insisting that companies have at least one woman director was a smart move?

Well, the Peterson Institute study seems clear that it’s not just a matter of getting women to the top ranks of management. The impact of having more women in the so-called ‘C-suite’ is bigger than that of having a woman on the board or as the CEO. So, tokenism won’t work.

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Published on February 10, 2016
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