the impact of gender diversity on firm’s performance
Introduction
- The presentation highlights the impact of gender diversity on firm’s performance
- The usefulness of the quota system will be discussed
- Percentage of women on board shall be highlighted
- The casual relationship existing between a firm’s performance and powerful women on board shall be explored
- Impact of women directorship on firm’s performance shall be highlighted
Changes in overall firm’s performance due to the presence of powerful women on board
- Boardroom decision-making is positively influenced due to the involvement of a greater number of women
- The overall team performance enhances as well
- Employee competitiveness is strengthened
- The financial performance of a firm increases
- Discussions and ideas are exchanged proactively
Cont.
- Contradictory research suggests negligible impact due to the presence of women
- Presence of strong women leaders on board enhances firm’s performance only when growth is slow
- Research also suggests the absence of a relationship between board diversity and Tobin’s Q listed organizations
Factors affecting a firm’s performance
- Difficult times and a specific percentage of women impact the firm’s performance
- A study conducted on 520 companies by considering women percentage on board (high to low)
- The study showed that casual relationship does not exist between firm performance and gender diversity
Cont.
- Another study on 89 Europe-based companies and 115,000 employees has been done
- Relationship between % of women and other factors were considered during the study
- Factors such as stock prices, ROE and EBIT were considered
Cont.
- Results showed that due to the presence of women on board, ROE increased by 11%, EBIT by 91% and stock price by 36%
- Hence, the study showed the existence of a positive relationship between firm performance and women on board
Promotion of gender diversity using a quota system
- A study conducted on Fortune 500 companies showed that only 27 companies comprise of women in the directorship role
- Not even 30% of women were represented on board
- On a global level, this finding is quite disheartening
- Therefore, the issue can be resolved by implementing the quota system as per policy makers
- The system should ensure equal gender-representation across boards
Contradictory opinions regarding quota system
- Policy makers claimed that the quota system might be perceived as illegal or unethical
- People might feel that justice has been violated due to quota system
- Negative perceptions will lead to negative consequences for the firm
- Male employees might feel less engaged with work
- The real purpose behind setting the quota system might get distorted
Cont.
- Issues emerging from the quota system can be resolved by justifying the real narrative behind implementing the system
- The definition of “Ideal candidates” should be re-examined
- The quota system is supposed to promote gender diversity as well as parity
- It should be perceived as an “internally motivated” change
Gender diverse board- Comparing the countries
- Boards in some countries are fairly more gender-diverse
- Regulations in some countries play a significant role in enhancing women percentage on board
- Legislations in Europe, France and Norway, are strict
- Gender diversity is 42% in Norwegian boards
- In the UK, approximately 25% seat on board is reserved for women
Cont.
- Now, the target for FTSE 350 companies is to represent 33% women on board by 2020
- Countries emphasizing on masculine culture has low female directors on board. E.g-South Korea
- Despite the absence of law in Canada, women directorship is high
- US and Canada are culturally “less masculine,” and therefore women directorship is high
Conclusion
- Women participation should be facilitated in countries having low directorship rate
- Quota system can be a useful method
- Cultural norms centered on feminism increases women participation on board