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Setting the benchmark in corporate integrity

Male-only boards “short-change investors”

Females sitting on boards of directors are more prepared to use their initiative than their male counterparts when it comes to decision making, creating better corporate leaders, according to a new study
Gail Kelly, CEO of the Westpac Group, announced record profits in 2011. The Australian banking giant unveiled a 10 percent jump in annual profits to $7.2bn

Females sitting on boards of directors are more prepared to use their initiative than their male counterparts when it comes to decision making, creating better corporate leaders, according to a new study

The paper, published in March, in the International Journal of Business Governance and Ethics found that male directors, who made up 75 percent of the survey sample, opted to make decisions based on rules, regulations and traditional ways of doing business. Female directors, on the other hand, are less constrained by these parameters and more prepared to eschew tradition and consider the interests of all stakeholders as well as be more cooperative and more inquisitive.

The study, which polled 624 board directors in Canada, presented board members with morally conflicting scenarios and asked them to solve the problems, explaining how they came to their conclusion. The results showed that women were more likely to use co-operation, collaboration and consensus building with their answers showing that they were “less constrained” in their problem-solving skills than their male counterparts.

“Women seem to be predisposed to be more inquisitive and to see more possible solutions,” said Chris Bart, conductor of the study and professor of strategic management at the DeGroote School of Business at McMaster University. “At the board level where directors are compelled to act in the best interest of the corporation while taking the viewpoints of multiple stakeholders into account, this quality makes them more effective corporate directors.”

“Our findings show that having women on the board is no longer just the right thing but also the smart thing to do. Companies with few female directors may actually be short-changing their investors,” said Bart. Previous studies also shed a favourable light on placing women on boards of directors. A 2009 paper shows having just one female on the board cuts the risk of bankruptcy by 20 percent. Other studies indicate that women make other board members more civilised and sensitive to other perspectives and reduce ‘game playing’ in the boardroom.

“Men are pack animals and they are very much quick to recognize the hierarchy of the alpha males in the group,” said Bart. “They would be very unhappy with people coming in with different values or views on the board.” This is reflective of the selection bias highlighted by a recent report by the Equality of Human Rights Commission. Gender Diversity on Boards: The Appointment Process and the Role of Executive Search Firms found that only candidates who are perceived to ‘fit in’ with the values, norms and behaviours of existing board members are appointed; a process that favours male candidates. This behaviour goes against Bart’s findings, as gender diversity is likely to improve an organisation’s standing.

Women make up just nine percent of corporate board membership globally. Baroness Prosser, deputy chair of EHRC, said: ‘Research shows that diverse boards produce better performance. Many companies recognise this and we commissioned this report to support their efforts to improve the representation of women at board level. However, the often subjective way appointments are made ends up replicating existing boards rather than bringing in the talented women who could bring real benefit to individual company performance.”

 

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