Women quotas on the board: A governance or gender issue?
Some researchers postulate that increasing the percentage of women on boards can be linked to improved firm performance, corporate social responsibility and ultimately an increased number of women in other high-level positions.
Other researchers have found that women have a propensity to engage in more rigorous deliberations, risk assessment, strategic thinking and monitoring. A diverse board asks critical questions and a range of perspectives can be brought into the discussions to help avoid the group-think mentality. Women directors are believed to contribute to effective governance because they usually come as outsiders – outside of male networks and thus more willing to challenge and change norms.
Women’s social networks tend to be wider and more diverse than men’s and as a result, firms with more women on their boards introduce a broader range of perspectives into their decision making.
A 2013 study by Post and Byron looked at 140 surveys of board performance in 35 countries and found that having more women on a board improved a company’s financial performance. Post and Byron then concluded that with more women on the board, a wider range of insights, perspectives and experiences are brought to bear on the issues a board faces and, ultimately, improves how a board makes decisions. Further, the researchers argue that in more diverse boards, where debate and challenge are permitted to thrive, there tend to be more robust business. But the results were found to hold in countries with stronger shareholder protection practices. Some social researchers believe that female directors’ greater reluctance to lay off workers reflects a praiseworthy social orientation which may be rewarded by markets. This implies that more diverse boards are less subject to group-think and more likely get in touch with the outside world. In the long run, board diversity will allow a company to better represent and understand its own workforce, thus improving the delivery of strategy and future performance.