More Women Lead, Yet Still Lag

Women are getting into more board seats and C-suites, yet progress is still hard-won and parity a long way off.

Over the last two decades, corporate leaders have slowly warmed to the idea that diversity contributes to the success of executive teams. “The share of women sitting on the boards of Fortune 500 companies has more than doubled, from 9.6% in 1995 to 22.2% in 2017,” says the Pew Research Center in announcing its 2018 report on Women and Leadership. Nearly three-fourths of companies worldwide (73.5%, according to MSCI) now have at least one woman on the board.

That progress has been won with decades of research attempting to quantify the benefits. Consultant Catalyst’s Bottom Line research series reported in 2011 that companies with the most women directors had 16% higher return on sales and 26% higher return on invested capital. MSCI found that companies with “strong female leadership” (largely defined by board representation) showed higher return on equity and better price-to-book ratios. Companies with few women directors had higher-than-average governance controversies. “On average … diverse companies are simply more profitable than their less diverse peers,” proclaim authors Srilatha Singh and Kathryn McDonald of Rosenberg Equities in a 2018 research paper for AXA Investment Managers titled, “Does Diversity Provide a Profitability Moat?”

Even so, women board representation hit only 14.7% at year-end 2015, according to a worldwide survey by Credit Suisse Research Institute (CSRI). Various surveys from MSCI, Deloitte and others find women hold 12%-15% of all board seats worldwide. The consumer-staples sector led in the CSRI survey, with 17.4 % women directors. Somewhat surprisingly, given its reputation, the finance industry came in third, at 16.9%, just behind telecommunications, 17.1%.

“The [financial] industry has undoubtedly become more diverse and inclusive in recent years,” says Andrea Dunlop, CEO of Merchant Acquiring for Europe at Paysafe Group, an online payment multinational. “But diversity is a journey, and we still have a long way to go.”

To date, the most high-profile efforts have centered on the boardroom. “Executives set the norms within a company’s culture,” says Monica Eaton-Cardone, CIO and co-founder of risk-mitigation-services firm Global Risk Technologies. “When you have more diversity in the boardroom, you are likely to have more diversity throughout the company.”

Women such as Mary Barra (General Motors CEO since 2014), Marillyn Hewson (Lockheed Martin CEO since 2013) and Emma Natasha Walmsley (CEO of GlaxoSmithKline since 2017) joined earlier corporate leaders such as Ching Ho (CEO of Singapore-based Temasek Holdings since 2004), Ursula Burns (Xerox CEO 2009-16) and Denise Morrison (Campbell Soup CEO 2011-2018), who have served both as CEOs and as directors on other companies’ boards.

“Having a top-down approach with diversity at the senior level filters down and encourages a positive ripple through all levels,” says Melissa McKendry, vice president of Implementation Services for Retail Banking and Fraud at ACI Worldwide, a US payment-systems company. “Diversity and inclusion shouldn’t be seen as a differentiator; it should be seen as the norm.”

Europe Leads

As Credit Suisse tells it in its report Gender 3000: The Reward for Change, Nordic countries have been trailblazers in boardroom gender diversity, largely through the introduction of quotas and targets—with penalties for not meeting them. Norway, Iceland, Finland and Sweden have nearly double the average percentage of women on boards (34%) than EU countries without such measures. In 2015, Norway approached parity, with nearly half—46.7%—of board seats held by women, up from 36.6% in 2010.

Other parts of Europe are also in the vanguard. In France, women hold 34% of board seats. Average board representation of women in Europe rose 80%, to 24.4% at the end of 2015, over the previous six years, according to CSRI. Quotas seem to work, which may be why California Governor Jerry Brown this year signed the first boardroom quota law in the US: By the end of 2019, publicly traded companies with headquarters in California must have at least one female board member. In North America, boardroom diversity has increased by more than 33% since 2010, according to CSRI.

Asia is the real laggard. Although it has shown a 60% rise in women directors overall from 2010-15, that great leap forward is largely attributable to the very low base. According to the CSRI study, boardroom gender diversity was lowest in Japan (3.5%), followed by South Korea (4.1%) and Taiwan (4.5%).

Challenging All Those Boys’ Clubs

To be sure, there is to some extent a “pipeline problem” of too few women studying finance. Glassdoor, a US-based job recruitment site, reports that 61.5% of finance degrees are held by men. Yet there are cultural components even to the way education and training are approached.

“Practical steps, such as blind CV screening and reviewing job adverts, competency frameworks and performance-management criteria for gender-neutral language help,” says Andrew Cocks, a consultant at Norwegian online survey software company Questback.

Amplify Trading, which provides practical training for the financial sector, has developed a technology to help global firms find the right candidate among students from diverse cultural backgrounds through trading-floor simulations that focus on individuals’ skills rather than resumes. “We measure people’s behavior, their conduct, their resilience, their patience, how well they perform under stress or so-called criticism and how well they work with others,” says William de Lucy, CEO and co-founder of Amplify Trading. In the last few years, over 100 business schools and universities in the UK and elsewhere in Europe have adopted the technology, de Lucy says, and the company has also opened an office in China. Algorithms, however, tend to reproduce the unconscious biases of their creators.

Other types of initiatives effectively build corporate inclusiveness. At DBS Bank in Singapore, women now form 60% of the overall workforce, and 40% of the bank’s senior management are women. Two of the bank’s largest business units, Consumer Banking/Wealth Management and Institutional Banking, are led by women, says Lee Yan Hong, head of Group Human Resources at DBS. Lee says key policies that support women include health and wellness programs, flexible working arrangements, training and development, and internal mobility programs.

“At DBS, we believe gender, generational and cultural diversity is our source of strength,” Lee says. “We believe that when you achieve a critical mass of women across all levels, this will make a difference in an organization’s ability to succeed.”

Similarly, ACI Worldwide provides mentoring and sponsorship. As a result, there are women on the board, on the executive leadership team and in senior roles across the business, McKendry says. “Promoting equal opportunity, diversity and inclusiveness have been on top of my agenda, especially since becoming site leader at our Watford office,” she adds.

Tellingly, female executives agree that much of their career success still depends on their own determination in overcoming ingrained attitudes and unconscious policy choices within their organization.

“As women, we struggle to put ourselves forward,” says Dunlop. “This was something that held me back early in my leadership career, and overcoming the challenge meant finding my voice and asserting myself.”

That means fighting for wage parity. A 2018 study by Questback shows the persistence of the gender pay gap—even under quotas that strengthen women’s representation. The UK financial sector, for example, pays men on average 30% more than women—the largest gap of any business sector.

Such gender barriers may become more powerful as competitive barriers. Rosenberg Equities researchers Singh and McDonald note that diversity provides a “profitability moat” in bad times as well as a greater strength in good times. “Historically,” they conclude, “higher diversity today has translated into higher return on equity tomorrow.”