Is it true that the more women in the management of the company, the higher its financial results? In the early 2000s, it seemed so. In the early 2010s, no. The truth, apparently, is that there is simply no direct connection between the first and second.
In 2003, the Norwegian government passed a law requiring that 40% of the seats on the boards of directors of Norwegian companies should be held by women. For a country in which the equality of absolutely everyone and decisively in everything is proclaimed one of the main values, there was nothing particularly surprising in this. Moreover, the first results showed that the decision also turned out to be economically justified: the financial indicators of many companies went up.
Based on this experience, many politicians and entrepreneurs to this day insist that the more women in leadership positions, the better. And it probably is. However, the economic validity of this assertion is increasingly questionable. On the eve of a decade of the historic decision by the Norwegian authorities, a group of researchers decided to once again check how things are going with the local companies. And found that after a short-term rise, their financial performance began to decline1. There is no definite answer to the question of what happened. But there are several assumptions. One of them is related to the global market situation. In the context of the economic crisis that erupted in 2008, and the consequences of which have not been overcome to this day, the board of directors may even consist entirely of Nobel laureates, but it will be extremely difficult to demonstrate the growth of the company.
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There is, however, another consideration. Researchers note that the law itself could play against those good ideas in the name of which it was adopted. After all, it was he who obliged Norwegian business to raise the representation of women on boards of directors to a certain level. As a result, people who did not have the necessary experience and knowledge could come to leadership positions – simply “on a gender basis”, in order to comply with the letter of this very law. And this, in turn, could not but affect the quality of managerial decisions not in the best way.
Therefore, today serious researchers prefer to speak on this topic with great caution. More precisely, no one disputes the importance of the presence of women in leadership positions. For example, Harvard Business School professor Robin Ely, who has devoted many years of research to this topic, is sure that the more diverse the composition of any team, the more successful decisions this team can generate. And this applies not only to gender, but also to racial and national diversity.2. However, this diversity is a resource that businesses have yet to learn to take full advantage of. To believe that the appointment of women to leadership positions automatically leads to an increase in company profits is at least naive. Perhaps there is a correlation between the presence of women on boards of directors and the growth in financial performance. However, there is no need to talk about a direct causal relationship.
Moreover, such talk is even harmful, believes Robin Ely. They are not supported in practice and, as a result, may lead top managers to believe that other arguments in favor of appointing women to high positions do not deserve to be taken seriously either.
1 Kenneth R. Ahern, Amy K. Dittmar «The Changing of the Boards: The Impact on Firm Valuation of Mandated Female Board Representation». The Quarterly Journal of Economics 127 (1), 2012.
2 Robin J Ely et al. «Reader in gender, work, and organization». Blackwell Pub., 2003.