Why Talk is Expensive When it Comes to Boardroom Diversity

Business meetingIf you’re tired of seeing headlines about the financial advantages and growth opportunities that women executives in the boardroom could deliver to businesses, maybe it’s time we flip that conversation on its head.

As much as highlighting the potential that companies could realize if only women were in the decision room, recent findings quantify the tremendous losses that companies are bleeding right now by their absence. The lack of women in boardrooms and executive positions is, plain and simple, being identified as self-sabotage for organizations.

Male-Only Executive Boards Create an Opportunity Cost

Recent research by Grant-Thorton has revealed that the opportunity cost for companies with male-only executive committees in the S&P 500, FTSE 350, and CNX 200 across the US, UK, and India was a whopping US$655 billion in 2014, and US $567 billion in the US alone, or 3% of GDP. The loss results from lower return on assets.

It turns out that talk is not cheap. When it comes to gender diversity at the executive level, talk alone is very expensive. (As is “action” that is PR-strong but falls short of robust follow through on outcomes.)

Only 35 of US S&P 500 companies have at least one woman executive in the boardroom (a far lower ratio than UK or India), but those companies with female executive presence on the board outperformed the all-male executive majority by 1.91%.

Francesca Lagerbeg, global leader for tax services at Grant Thornton said that corporate culture “kick(s) the can down the road” when it comes to board diversity not because they don’t know it’s necessary, but out of short-term fears of what it takes to implement real change.

“These companies are suffering now,” Lagerbeg says. “A lack of action now will make it all the more difficult to respond in the future when both problems are likely to be more acute.”

Executive Women in the Boardroom Equal Better Decisions

What’s noteworthy about this study is it hones in specifically on the presence of at least one female executive within the boardroom, holding female non-executives aside, as plumping up boardroom statistics mostly with female non-execs (UK) still leads to power imbalances on decisions.

“The research clearly shows what we have been talking about for a while: that diversity leads to better decision-making,” said Lagerbeg. “We only looked at listed companies in three markets and the figures are compelling. Now imagine extrapolating the results for all companies globally.”

The International Monetary Fund (IMF) recently asserted that more women on the boards of financial institutions leads to stability. Iterating opportunity cost, the IMF report states, “Women’s financial exclusion limits the growth-promoting potential of finance and it may also prove costly in terms of lower financial stability.” The authors wrote “…on average, stability is significantly higher in banks with a higher fraction of women in the board of directors.”

Research has also demonstrated that companies with a compelling track record of promoting female executives consistently perform better across 18 measures of profitability.

Despite This, Gender Parity Is A Long Way Off

It’s contrary to the nature of businesses not to evolve when compromised operational strategies lead to loss, but that’s happening on a macro level.

It will take 28 years to achieve gender parity in the boardroom at the present rate of change and that’s not even specific to executive seats.

Forbes contributor Sabina Nawaz asserts that real change will take more than current low levels of consistent jogging towards an abstract goal. Nawaz argues it takes real intensity, including: honest assessments of the presence of women in leadership roles, programs to meet quantifiable metrics by a determined date, and transparently published results. But too many companies are still talking and denying instead of committing.

What If You Don’t Want to Wait?

What about women who want a board seat and don’t want to wait until 2042 before it might be fair game? What about women who don’t want to wait for their company to catch up to the business impact of her voice?

Slow progress is not the same as no progress. This year, there are 11 women executives that are new to Fortune’s 2015 list of Most Powerful Women. Women are gaining ground on leadership positions within boards as well as representation on the committees that select new members.

Just because many companies are self-sabotaging their growth does not mean you have to do the same. If you want a board seat, beginning to make your bid is far better than biding your time until it’s easier to do so.

Forge Your Connections

Develop your connections to existing board members and seek sponsors. The recommendation of board members is the strongest factor in new member selection. If you don’t know the board, it’s unlikely they know you. Take the risk of going beyond your comfort zone with connections.

Be Visible

Janice Ellig, chair of the Corporate Board Initiative of the Women’s Forum of New York, recommends to “pat yourself on the back in a very visible and confident way.” Ellig advises women to “value their ambition” and “stand up and make it known” that you want a CEO or board position.

Actively Seek

Jan Babiak suggests that since 70% of board roles are attained through existing board/management networks, it’s important to cast wide. Connect with high-level professionals outside of your immediate field of work because opportunities may be found where you’re not looking.

All in all, it’s a wake up call to companies: Waiting for gender executive diversity to get easier? It’s a strategy that is costing you.

By Aimee Hansen