In the effort to increase gender equity on corporate boards, numbers are deceiving
By Laura Braddick
Lately researchers and advocates have been heralding the growth of women leaders in business. A report released by Credit Suisse in 2016 shows the percentage of female directors has grown by 54 percent since 2010.
But while critics of gender disparity in business leadership are cheering this growth, Towson University finance professors Michaël Dewally and Susan Flaherty say the news isn’t as great as it sounds.
“While numerical progress is being made, the substance of the change is not as large as typically indicated in the media at large,” says Dewally. “Despite the headline news about females receiving a greater acceptance in the board room, we find that the process through which they get included is not really inclusive.”
“Women simply on average do not yet replace male board members but, rather, are added as directors and are given lower-level responsibilities on the boards.”
During an analysis of how social norms affect female board membership, the professors actually uncovered the trend that women do not tend to replace exiting male board members but rather are appointed when board sizes grow.
“Women simply on average do not yet replace male board members but, rather, are added as directors and are given lower-level responsibilities on the boards,” says Dewally.
So not only is female representation not increasing in relative terms, but because women are being brought in at a lower level, their influence and impact on the corporations they serve are not at the same level as their male counterparts.
This matters not just for diversity’s sake. Research shows companies with diverse boards and executive management see tangible benefits to their performance and bottom lines.
“Women have been found to be better stewards of corporations,” says Dewally. “They are more diligent monitors in the boardroom and their presence is linked with lower incidence of accounting restatements and lower corporate risk-taking. However, this effect can only be felt when more women are represented on the board. It takes multiple women for the benefits to accrue.”
Dewally and Flaherty’s study, which included 1,630 firms and 30,369 female directors over a 10-year period, also finds that in areas of the United States where people are more likely to claim affiliation with and attend church, there are fewer women in the boardroom. On the other hand, in regions where women have higher levels of educational attainment, there are more women serving in board roles.
Dewally and Flaherty are both associate professors in the Department of Finance and have authored numerous research studies on corporate governance and performance. Their paper, “The Impact of Social Norms on Female Corporate Board Membership Inclusion,” was published in Managerial Finance in 2016.
