Women on Top = Women Throughout

by Sima Matthes (New York City)

A recent study by Catalyst provides evidence that gender diversity at the top of major corporations leads to increased financial performance. Additionally, the report states that the more women a company has had on their board of directors in the past, the more female corporate officers it will have in the future.

The Catalyst study, Advancing Women Leaders: The Connection Between Women Board Directors and Women Corporate Officers, was released in July, and validates what many of us have suspected: that there is a clear and positive correlation between the percentage of women board directors in the past and the percentage of women corporate officers in the future. This report applies a mathematical formula to predict the proportion of women in staff roles based on the number of women in leadership.

Catalyst’s latest research shows a clear and positive link between the percentage of women board directors in the past and the percentage of women corporate officers in the future:

• Companies where women comprise 30 percent of the board of directors in 2001 had, on average, 45 percent more women as corporate officers by 2006, compared to companies with no female board members.
• Companies with the lowest percentages of women as directors in 2001 had, on average, 26 percent fewer female corporate officers 5 years later than those with the highest percentage of women on the board of directors.
• Companies with two or more female members on the company’s board in 2001 had 25 percent more female corporate officers by 2006 than companies with one woman on the board in 2001.

Clearly, when women are permitted to climb to the top, they tend to take other women up the line with them. When women are well represented on a corporation’s board, those directors appear to have a greater effect on increasing the percentage of line positions held by women than they do on staff positions held by women. This helps women move through the pipeline into other leadership roles, including the CEO spot. “Women leaders are role models to early- and mid-career women and, simply by being there at the top, encourage pipeline women to aspire to senior positions. They see that their skills will be valued and rewarded,” said Lang.

The report also shows that Fortune 500 companies with the largest representation of women board directors and corporate officers achieve, on average, higher financial performance, said Ms. Lang. “What’s good for women is good for business. Simply put, more women on corporate boards correlate with more women in the C-suite and better financial performance—a real win/win for companies, shareholders, and talented women seeking companies that support their advancement.”

These findings seem to contradict a 2007 study by Stanford University School of Business, which suggested that the effects of female leadership on the hiring of women into technical roles depended on where the women are located within senior management. At that time, less than a year ago, they found that women’s overall presence in senior management had little effect on the number of women within the firm. Their theory was that senior women are concentrated in HR and administrative positions (33 percent), with very few overseeing engineering or R&D (4 percent). They found that only one in ten of the firms had had a woman in the CEO, president, or founder slot. However, firms in which a woman had occupied one of those top positions-or had overseen the engineering or R&D function-were significantly more likely to employ women in scientific and technical positions.

An interesting social experiment in Europe further bears out the findings in the Catalyst report. All over Europe, by fiat or by consensus, corporations are being compelled to achieve parity on their boards. Following a report similar to the Catalyst report, an otherwise conservative legislator in Norway– Ansgar Gabrielsen, then minister for trade and industry– instituted a mandatory diversity policy, requiring state run enterprises as well as private businesses to increase the number of women on their boards or face closure. “What’s the point in pouring a fortune into educating girls, and then watching them exceed boys at almost every level, if, when it comes to appointing business leaders in top companies, these are drawn from just half the population – friends who have been recruited on fishing and hunting trips or from within a small circle of acquaintances?” he says. “It’s all about tapping into valuable under-utilized resources.”

Although the news sent rumblings and grumbling through the mostly-male business community, the results speak for themselves: this spring, the government announced full compliance, with nearly 600 women replacing or joining men on the boards of all types of companies. Spain followed with a similar law requiring companies to give 4 out of 10 board positions to women by 2015. Germany is working on a “voluntary charter” committed to gender equality, and the Netherlands is similarly committed to putting women in at the top.

Certainly, the idea of quotas comes with its own baggage. It’s insulting to some women, who chafe at the idea that others will assume that they achieved their position simply because they’re women. It’s upsetting to those who have paved the way by their own hard work. And in the U.S., where we are often content to focus on the things that divide us, this sets up just one more area in which women are given a leg up that men aren’t.

So how to assure diversity without creating a bigger issue? Start at the beginning—equalize admission to business programs, and, from there, establish gender-neutral policies for corporate recruiting. Then institute progressive programs at the corporate level to assure board diversity—ideally, free from quotas and mandates—even in the most resistant industries. Finally, offer both men and women the assurance that equality is the goal, not re-distribution of inequity. Men at the top will be more willing to help women get there if they’re not afraid their jobs will disappear; women at the top will help other women get up the ladder more quickly.

Ultimately, the economy does better when our corporations do better, and our corporations do better when their policies are gender-blind. In the words of Ms. Lang, “A gender diverse board signals the right tone at the top and the importance that a company places on creating a successful work environment for all employees.”