The gender gap and the need for women in leadership have become topics of broad discussion in the business world. On the subject of gender diversity on boards, large Canadian companies are already making amendments incorporating more women on their boards. However board diversity still continues to remain a problem in many other large companies as well as mid-market organizations.
The 2013 Catalyst Census: Financial Post 500 Women Board Directors finds that only 15.9 percent of board seats in corporate Canada are held by women, an increase of just 1.5 percentage points since 2011. Nearly 40 percent of companies had no women board directors, and although one-fifth of companies have 25% or more women serving on their boards, more than one-third have zero women on their boards. Catalyst conducts this Census biennially and has found exceptionally slow growth each year.
Canadian organizations need to contribute to this change. A change that will result in more women on corporate boards.
Why should boards have more female directors? – McMaster University
- Boards with high female representation experience a 53 percent higher return on equity, a 66 percent higher return on invested capital and a 42 percent higher return on sales (Joy et al., 2007);
- Having just one female director on the board cuts the risk of bankruptcy by 20 percent (Wilson, 2009);
- When women directors are appointed, boards adopt new governance practices earlier, such as director training, board evaluations, director succession planning structures (Singh and Vinnicombe, 2002);
- Women make other board members more civilized and sensitive to other perspectives (Fondas and Sassalos, 2000) and reduce “game playing” (Singh, 2008);
- Female directors are more likely to ask questions rather than nodding through decisions (Konrad et al., 2008).
What is the effect of having more women on corporate boards?
Having a healthy mix of men and women in corporate boards allows the organization to have better leadership. A recent research by McMaster University which was published in the International Journal of Business Governance and Ethics says that women have better ability to make fair decisions which makes them better corporate leaders. The study said that male directors, who made up 75% of the survey sample, prefer to make decisions using rules, regulations and traditional ways of doing business or getting along. Female directors, in contrast, are less constrained by these parameters and are more prepared to rock the boat than their male counterparts.
Women are known to take decisions independently and consider all stakeholders while taking decisions. The primary responsibility of a corporate board is to advice the organization. However, the role of the corporate board today is evolving stretching to dealing with globalization, excessive competition as well as understanding and considering cultures while making critical business decisions. The board is expected to have increased skills, experience, perspectives which can only be achieved by incorporating women in them.
Gender balance is seen as an important element in good corporate governance and also integral to staying ahead in the race. Board diversity is one such opportunity to ensure that balance which leads to alternative and critical views resulting in better board decisions.
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