More women on the board – why does it matter? (extract from Davies Report)
“The issues debated here are as much about improving business performance as about promoting equal opportunities for women. There is a strong business case for balanced boards. Inclusive and diverse boards are more likely to be effective boards, better able to understand their customers and stakeholders and to benefit from fresh perspectives, new ideas, vigorous challenge and broad experience. This in turn leads to better decision making.
This business case is backed by a growing body of evidence. Research has shown that strong stock market growth among European companies is most likely to occur where there is a higher proportion of women in senior management teams. Companies with more women on their boards were found to outperform their rivals with a 42% higher return in sales, 66% higher return on invested capital and 53% higher return on equity.
Despite this evidence, women are under-represented on the company boards of UK plc. In 2009 only 12.2% of directors of FTSE 100 companies were women, and on the boards of FTSE 250 companies the proportion was just 7.3%.5 By 2010 these figures had moved to 12.5% for FTSE 100 and 7.8% of FTSE 250.
The pace of change remains too slow, despite a range of initiatives aimed at training, mentoring and supporting women to be “board ready”, and projects undertaken by companies to address organisational issues such as unconscious bias.
This is not just a gender numbers game. It is about the richness of the board as a whole, the combined contribution of a group of people with different skills and perspectives to offer, different experiences, backgrounds and life styles and who together are more able to consider issues in a rounded, holistic way and offer an attention to detail not seen on all male boards which often think the same way, and sometimes make poor decisions.
Of course a key factor driving boards is profitability and return to shareholders. A range of research illustrates the positive impact that women’s contribution to the boardroom can make to the bottom line of the company’s finances, and positively associates gender-diverse boards with improved performance.”