Business

Saturday 23 August 2014

Why broads on the board can be good for profits

Sarah McCabe

Published 30/04/2013 | 05:00

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RTE board member Orlaith Carmody says that women seeking to advance in the corporate world face a "glass cliff".
A lack of women leaders is more acute in some industries than others.

THERE is no disputing the fact that women are sorely under-represented in the boardrooms of Ireland's biggest companies; not even one in 10 board members of publicly listed Irish companies is a woman.

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But this is not only a challenge to gender equality – it is also a challenge to the competitiveness of businesses.

The EU calls the lack of women on corporate boards "a waste of much highly qualified and needed human resources".

And multiple studies have shown that the presence of women on company boards has a clear positive effect on bottom-line results.

Research from management consultancy McKinsey found that companies with the most gender-diverse management teams had 17pc higher stock-price growth between 2005 and 2007 than industry averages and almost double the average operating profit in another two-year period.

Global research company Catalyst says that companies with more women on their boards have on average 42pc higher sales and a 66pc higher return on invested capital.

This is partly down to women's more risk-averse approach. Studies have repeatedly shown that female directors are more cautious when it comes to taking risks and though risk-taking is a key part of growing a business, a calculated attitude pays off.

And given that recent estimates found women control about 70pc of global consumer spending – and consumer spending in the US alone fuels 80pc of that country's economy – it also makes sense to have corporate leaders that reflect the people who are actually buying goods and services.

A lack of women leaders is more acute in some industries than others.

The only organisations that tend to have an equal representation of men and women on their boards are education or local community bodies.

RTE board member Orlaith Carmody says that women seeking to advance in the corporate world do not face a glass ceiling any more – they face a "glass cliff".

While more than half of the students graduating from European universities are women and the male/female divide is not excessive in graduate positions, there is a sudden drop-off in the number of women achieving middle and senior management jobs.

Only 32pc of all managers in Europe are women, and a tiny 3pc of European CEOs are female.

Various solutions have been offered to rebalance this. Mandatory quotas, more generous maternity rights and calls for a move away from family–unfriendly corporate cultures that allow no time at home have all been suggested.

EU proposals ask that publicly listed European countries target to have 40pc of their boards made up of women by 2020, though this is not yet legally binding.

One thing is clear: change is not happening fast enough. About 16pc of UK listed companies have at least one woman board member compared to Ireland's 9pc, but it was recently calculated that it will take another 212 years to achieve gender parity in British boardrooms.

Irish Independent

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