The discussion over the need for more women in leadership positions just went up a notch with a new major study showing the increased presence of women in boardrooms brings in greater profits for a company. This is a big deal, mainly because of the divided opinions about implementing gender quotas.
We’ve seen many countries use gender quotas when it comes to ensuring more women are represented in governments. In the private sector, specifically in Silicon Valley, there are numerous tech giants who have shown a glaring lack of diversity (women, people of color, LGBT people) in their ranks but all vow to change that. Other than implementing some sort of diversity initiative or quota, it can be tough to ensure a company’s C-suite (CEO, CFO etc) is not just made up of straight, white men.
On the other side of the argument comes the point about merit. Everyone in a position of leadership should be there by merit and merit alone, and we 100% agree with that. But what checks are in place to ensure that in a system that looks purely at qualifications, that women, minorities and LGBT folk are considered in the same pool? How can a company (or those firmly against quotas) say for sure that the system is not already rigged in the favor of those who are traditionally privileged when it comes to leadership?
Instead of continually pondering these questions and going around in circles, the Peterson Institute for International Economics did a study to prove that without diversity, it’s the bottom line that suffers.
Together with legal organization EY, which helps governments and businesses understand and tackle major trends, the study analyzed results from 21,980 global, publicly traded companies, in 91 countries from various industries and sectors and showed that having at least 30% of women in leadership positions, or the “C-suite,” adds 6% to net profit margin.
The evidence on women in the C-suite is robust: no matter how we torture the data we get the same result: women in the C-suite are associated with higher profitability,” said Marcus Noland, director of studies at the Peterson Institute, to QZ in an interview about the study.
The study examined women in CEO positions, female board members, and female C-suite members. While the female CEOs didn’t statistically outperform male CEOs, the more women were present on boards, the higher the margins of profit for a business. Yet, they pointed out, there is still room for improvement: 60% of companies had no female board members (13,017 firms), just over 50% had no female leaders (“C-suite”) (11,802 firms), 4.5% had female CEOs, and 3.8% of board chairs are female.
Another interesting aspect of this study was how paid family leave factored into the data. Countries that provide mandated maternity leave do not have more female leaders. But those with more paternity leave do. The US can count ourselves entirely out of that conversation because we are only of only a few countries in the world which don’t have a federally-mandated paid parental leave program.
But economists have shown time and time again that any business or company with a robust parental leave scheme not only save money in the long run but see better profitability and employee satisfaction over time. With the acknowledgement that we no longer live in the 1950s, more women are in the workforce than ever before, and stay-at-home dads are a thing, this kind of data is very important.
“It stands to reason that policies that allow for child care need to be met, but do not place the burden of this care explicitly on the woman, can allow women to have a greater chance of building business acumen and professional contacts necessary to advance to a level at which they would be invited to be part of a corporate board,” the study said.
Interestingly, in reference to gender quotas, the study does say that the implementation of such doesn’t necessarily reduce or improve corporate performance, but on another level, if the data doesn’t lie and businesses still refuse to live in the 21st century when it comes to equality, we still believe gender quotas can be a good thing.
We’re not sure how many more large studies like this have to exist before everyone is on the same page with paid parental leave and diversity in the boardroom. It’s not just about doing what is fair or right, it is fundamentally understanding that women bring innovation, intelligent decision-making and a different set of businesses strategies to a boardroom which can only add something positive.
There is no doubt ‘Lean In’ author Sheryl Sandberg is happy to hear this news.