A provocative new study suggests women make better corporate leaders because of their ability to make fair decisions when competing interests are at stake.
In the study, researchers from the DeGroote School of Business at McMaster University surveyed more than 600 board directors.
They found that women were perceived as not being afraid to go against traditional norms and to value opinions from a variety of stakeholders.
Survey respondents also believed women are more likely to consider the rights of others and to take a cooperative approach to decision-making. This approach translates into better performance for their companies.
The study is published online in the International Journal of Business Governance and Ethics.
“We’ve known for some time that companies that have more women on their boards have better results,” said Chris Bart, Ph.D., professor of strategic management.
“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 shortchanging their investors.”
Bart and co-author Gregory McQueen found that male directors, who made up 75 percent 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.
Furthermore, researchers believe the findings reveal that women corporate directors are significantly more inclined to make decisions by taking the interests of multiple stakeholders into account in order to arrive at a fair and moral decision.
Women leaders also tend to use cooperation, collaboration and consensus-building more often — and more effectively — in order to make sound decisions.
Researchers believe that women are naturally more inquisitive than men, allowing them to see multiple potential solutions.
This is especially important 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, said ays McQueen.
Experts say that universally, women make up approximately 9 percent of corporate board memberships despite arguments for gender equality, quotas and legislation.
Male dominance in board rooms continue despite evidence showing that female leadership has been linked to better organizational performance, higher rates of return, more effective risk management and even lower rates of bankruptcy.
Bart and McQueen believe the new evidence can help to equalize board membership. They believe inclusion of women’s higher quality decision-making ability will gives boards a method to deal with the multifaceted social issues and concerns currently confronting corporations.
How do people make decisions?
- Personal interest reasoning: The decision maker is motivated by ego, selfishness and the desire to avoid trouble. This method is most often exhibited by young children who largely tend to be motivated to seek pleasure and avoid pain;
- Normative reasoning: The decision maker tries to avoid “rocking the boat” by adhering to rules, laws or norms. Stereotypical examples of groups that use this form of reasoning include organizations with strong established cultures like Mary Kay or the U.S. Marines;
- Complex moral reasoning: The decision maker acknowledges and considers the rights of others in the pursuit of fairness by using a social cooperation and consensus building approach that is consistently applied in a non-arbitrary fashion.
Why should boards have more female directors?
- 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).
Source: McMaster University