Category Archives: Women

Building a Better Case for Women on Boards (by Cheryl Hurst, Postgraduate Researcher)

Over the last decade the concern for the underrepresentation of women in corporate boardrooms has steadily increased. The low number of women at the top of organisations has pushed the agenda for determining the circumstances and factors that both promote and impede women’s access to these top levels. In an effort to advocate for increasing the numbers of women on boards, research has tended to focus on the benefits women will bring to the company.

Often referred to as ‘The Business Case’, research in this area focuses on the importance of hiring from the complete talent pool; on the relationship between women and firm value; as well on the unique experiences and talents women characteristically can bring to organisational settings. Yet this ostensibly pragmatic emphasis, on connecting equality with the achievement of value related to organisational goals, is not as straightforward as researchers and policy makers make it seem.

Below, the challenges and concerns for the business case are addressed in the hopes of shifting dialogue to focus on the ideas of justice and fairness.

Changing Traditional Views of ‘Strengths and Experiences’

One of the main arguments delivered to companies is that by expanding their recruitment to include more women (and other minorities), organisations will benefit from the use of the untapped talent pool, bringing in different strengths and experiences (Seierstad, 2016). By pushing this argument it cannot be forgotten that women’s attributes may not fit within traditional ideas of what makes a successful board member.

This gives organisations the ability to argue against hiring from underrepresented groups, making the claim that they do not fit the requirements of the positions that need to be filled. Organisations have yet to widely adopt a view of ‘strengths and experiences’ that does not stem from the traditional model that values traits typically associated with men. This means that even as women accumulate varied experiences they may still not be viewed as appropriately qualified for the upper echelons of corporate leadership.

Previous and Existing Barriers

The focus on recruiting women solely as part of an effort to bring in new talent also ignores previous and existing barriers, including the discriminating tendencies of employers that women have faced throughout their academic and organisational careers.

Barriers may have resulted in women taking different avenues and approaches to the accumulation of ‘experiences.’  These different avenues, once again, do not reflect traditional perceptions of appropriate qualifications.  Without the qualifications traditionally thought of as necessary, there is a decreased chance of women being recruited, even if they have other relevant qualifications.

Those in top positions (predominantly men) who are responsible for a substantial amount of organisational rewards are still not offering equal promotions, pay rises, training, and networking opportunities to women as they are to men, again shaping the ‘strengths and experiences’ women are likely to have.

Performance Rationales

The focus on firm value has gone further, leading to performance related economic rationales for increasing women on boards. Since the early 2000’s research on board diversity and firm value has increased, showing positive relationships between the number of women and minorities on boards and an organisation’s value (Carter, Simkins, and Simpson, 2003).

The performance argument has been increasingly picked up in the media. In January of this year, the New York Times published an article asking: A Trillion-Dollar Question: Why Don’t More Women Run Mutual Funds? Again, the article conveys to readers that a mixed-gender team produces better returns. Similar articles have been published in The Guardian and Forbes, all using the ‘Business Case.’

Empirically, the argument that women increase performance is highly contested. Boards with higher numbers of women are shown to have been better performing boards overall, prior to and after hiring a more diverse range of members. This stresses the possible bias that better performing boards are able to focus more generally on diversity improvement from the start (Seierstad, 2016). While links have been found between increasing women on boards and company performance, the causality is disputed. This in itself demonstrates a need to move towards more concrete justice arguments.

Critics of the business case for increasing women on boards have also demonstrated that diversity management as a whole can actually be financially detrimental to organisations. There is a high cost to ‘diversity management’ techniques that are implemented unsuccessfully or without proper consideration (Noon, 2007). These costs are often related to high-turnover and absenteeism among women who do not feel welcome within the organisation or where proposed options for flexible working hours are not properly executed.

The business case also ignores how organisations benefit from the discrimination of women and minorities by exploiting their skillset and paying them lower wages than their white male counterparts (Noon, 2007). In even further divergence from the business case, research has highlighted that some countries and organisations have actually experienced negative consequences both in organisational performance and within capital markets after changing their existing board to include a more diverse range of people, with the potential of other attributing factors being overlooked (Bohren and Staubo, 2014).

Ideas of Justice and Fairness

While business case arguments have the overall goal of increasing women on boards, the presentation and ultimate message often becomes somewhat distorted when put into practice.  Instead, a focus on notions of justice and fairness in the advancement of diversity management will offer organisations and policy makers fewer avenues to refute the implementation of diversity strategies. The social justice rationale for increasing the representation of women is based on the principle that women represent half of the population and should therefore represent half of the boards in power (Seierstad, 2016; Dahlerup, 2005).

The social justice rationale does not disregard the potential economic benefits completely, but promotes/advocates a genuine commitment to equality and justice. Changing the argument is not positioned here as a complete solution, but reflects a necessary step in the pursuit of gender parity on corporate boards.  It is argued here that a sole (and contingent) focus on diversity for economic benefits negates the importance of changing views towards women in organisations because it is ethically just.

References

Bøhren, Ø. and Staubo, S., 2014. Does mandatory gender balance work? Changing organizational form to avoid board upheaval. Journal of Corporate Finance28, pp.152-168.

Carter, D.A., Simkins, B.J. and Simpson, W.G., 2003. Corporate governance, board diversity, and firm value. Financial review38(1), pp.33-53.

Dahlerup*, D. and Freidenvall*, L., 2005. Quotas as a ‘fast track’to equal representation for women: Why Scandinavia is no longer the model. International Feminist Journal of Politics7(1), pp.26-48.

Noon, M., 2007. The fatal flaws of diversity and the business case for ethnic minorities. Work, employment and society21(4), pp.773-784.

Seierstad, C., 2015. Beyond the business case: The need for both utility and justice
rationales for increasing the share of women on boards. Corporate Governance: An International Review.

AuthorCheryl Hurst, University of Leeds

 

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