Men and women are different. While that may seem self-evident, in the business world it affects perspective, attitude, behaviour and approach. This is particularly true in the way men and women function and approach their responsibilities as members of a board.
Yet women held only about 18% of board seats in 2015, according to the 2020 Women on Boards Gender Diversity Index of Fortune 1000 companies. Considering that women hold about half of all management positions and many are small business owners, that’s a pretty low figure. Among the broader ASX200, women now account for 25% of board positions.
The Qualities of an Efficient Director
A board of directors has a big responsibility to the organisation, its shareholders, and the community. Sound business management helps ensure good fiscal performance. Ethical management is good for the people in the organisation, community and—in many cases—for the environment. According to Jeffery A. Sonnenfeld, Founder and President of the Chief Executive Leadership Institute, important qualities for a member of a board include individual accountability, the ability to see the big picture while still paying attention to details, ethical behaviour, consistent meeting attendance and being well-prepared for meetings. One key skill is the ability to challenge a prevailing viewpoint and push for honest, thorough discussion of contentious issues.
A study of Fortune 500 companies done by Catalyst, a trusted resource for knowledge on gender, leadership, and inclusive leadership, took a look at the financial performance of boards that had women members. It found that boards with the highest percentage of women directors outperformed those without women directors by 53% in return on equity. Return on sales was 42% higher on average in those companies with more women on the board and return on invested capital was also 66% higher. The research found the “magic number” of women directors—irrespective of the actual size of the board—was three. A 2012 Credit Suisse AG report confirmed these findings.
Why Diversity is Important
Diversity matters in business for a number of reasons. Among these are diversity of thought, stakeholder representation, competitive advantage, and availability of essential skills,.
A. Diversity of thought promotes better decision-making and ensures that a board considers all available issues and options before making a decision. Otherwise, an organisation may become over-extended, take on responsibilities it can’t handle, or allow management behaviour that is bad for the organisation and its culture, or even illegal.
B. Stakeholder representation should be just what it sounds like—the board should be representative of shareholders, employees, and customers as well as community members at large. Excluding or not actively soliciting membership of those individuals means the Board loses valuable input and perspective.
C. Competitive advantage is more likely in an organisation that can handle the pace of change and current economic realities. Board members must be well-informed, able to make strategic decisions and willing to make hard decisions.
D. The availability of essential skills increases when women are recruited for board positions. Senior women executives have industry knowledge, functional expertise and operational experience. Younger women also bring a different generational perspective. All are beneficial to the board and the organisation.
Unique Qualities That Women Can Bring to a Board
Researcher Jan Grant, author of Women as Managers, notes that women bring unique characteristics to their roles as board members. They display more cooperative behaviour and are willing to hear from other Directors in discussions, ensuring that all viewpoints are heard. They have a sense of mutual attachment, which translates into mutual development and productivity rather than a win-at-all-costs mentality. Women express power through nurturing as well as strength, promoting the advancement of the entire group. Women are also more comfortable expressing vulnerability, which allows them to evaluate their strengths and weaknesses more objectively. Women’s capacity for empathy can help change an organisational environment and culture.
Sheryl Sandberg, Facebook’s COO, is the first woman to serve on Facebook’s board of directors. She is also on the boards of Women for Women International, the Center for Global Development, and V-Day. She is the author of Lean In, a book about the lack of women in government, business leadership and development, and feminism. Sandberg, who helped take Facebook from a position of “bleeding cash” to profitable within a three-year period, is a good example of how a smart, savvy woman can help improve the organisation when she sits on the board.
Networks and organisations such as Behind Closed Doors can help women who are aspiring for a board position by providing key insights, helpful tips, as well as useful networking, mentorship and sponsorship that will help them not only increase their chances of getting a Board position but also perform their duties outstandingly.
What is your organisation doing about promoting women into Executive roles to improve the pool of women available for Boards?
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