Mal Chenu* says myth-busting research from Macquarie University reveals that organisations with a woman in the top position reap many benefits.
Women are superior leaders and the organisations they run tend to outperform those with men at the top, according to new research from Macquarie Business School.
Dr Farida Akhtar (pictured), a Senior Lecturer in the Department of Actuarial Studies and Business Analytics, conducted research into the issue of gender performance at the top of corporations.
Her findings explode many myths still prevalent in the business world.
“Society generally accepts males in charge but when we look at the data, we actually find companies with female CEOs perform better,” says Akhtar.
“And the same goes for companies with a substantial female representation on their boards.”
Akhtar’s research looked at listed companies on the S&P500 Index from 2000 to 2015.
Her work has been published in peer-reviewed finance journals and is listed in the Australian Business Deans Council Journal Quality List.
“Firms with a critical mass of females on the board [three or more] have a stronger corporate culture with regards to their intangible assets, including employees,” Akhtar says.
“Females are fundamentally different from males and bring unique demographic skills.”
“They nurture their employees more.”
“They create better reward systems and greater flexibility.”
“Companies in high technology industries and those with unique products that are scarce in the market tend to do better with female CEOs.”
“Success in Research and Development [R&D] is highly prized in these companies and female directors can shape innovation and sustainable growth strategies.”
Akhtar believes the market favours women because they are more likely to listen to the market.
“Female-led firms are more likely to reduce unrest within internal corporate governance and this superior monitoring of management leads to greater transparency and performance,” she says.
Institutional shareholder influence
Akhtar’s research suggests that while there are several factors at play in the slow growth of women’s inclusion in top executive roles — such as traditional beliefs, culture, discrimination, low promotion rates and the “boys’ club” — one factor is particularly surprising, and disappointing.
“Companies in high-tech industries with a large proportion of institutional investors prefer more male directors,” she says.
“Institutional investors — and boards — say they want more female representation, but do they really?”
“They spout diversity principles, but they don’t actually follow through.”
“The raw data indicates boards with that critical mass of three or more females and no institutional shareholders prefer female CEOs.”
“If the CEO is also the chair of the company then that person is less likely to be female.”
Women are often appointed when organisations are in a crisis phase but these appointments are more precarious and more heavily scrutinised.
“Female CEOs not only have to show they are fit for the top job based on their merit, they must also prove that they are superheroes,” Akhtar says.
“When they inevitably prove not to be superheroes, their dismissal harms the reputation of all females and hinders the promotion prospects of other women.”
Akhtar says the cultural norm that perceives women’s leadership capabilities as lesser needs to change so that female CEOs have a fair chance to lead, particularly in high-tech industries.
There seems to be no valid reason for the discrimination.
In fact, as Akhtar explains, large, complex organisations should appoint more female leaders because of their unique qualities.
“The greater investment in employee engagement and nurturing that is more typical of female CEOs tends to drive innovation and generate higher performance from staff,” she says.
“The science says women are better leaders and companies led by women tend to do better, all things being equal.”
Diversity works
Akhtar says there are other benefits to fostering diversity.
“The value of a push for diversity quotas depends on the size, growth motives, board traits, governance quality and other factors,” she says.
“Generally, when diversity is introduced to boards, they tend to become more effective in their decision-making and there is less absenteeism from board meetings.”
“Currently, policies are dictating research rather than being informed by research.”
“It is important that we understand what is causing gender imbalance on corporate boards and among CEOs.”
“Gender quotas to reach a critical mass of females on boards will help break the glass ceiling but more research is needed to determine the corporate traits that limit female CEO and board representation.”
* Malcolm Chenu is a freelance writer and copywriter.
This article first appeared at lighthouse.mq.edu.au.
