Professor Renée Adams busts the myths around representation, risk-taking, and returns.
Policymakers are fond of pointing to the ‘business case’ to persuade companies to appoint more women to their boards. Women on boards are good for business, they say. If Lehman Brothers had been Lehman Sisters, then the 2008 financial crash probably would not have happened. The evidence is clear and compelling, they say. But according to Professor Renée Adams, it very much isn’t.
Professor Adams delivered the keynote lecture for the International Women’s Day celebrations at Saïd Business School. She challenged the research studies that are typically used to justify policy interventions and targets for women on boards, arguing that female directors are being appointed for all the wrong reasons. If they fail to deliver on these misplaced expectations, it can’t be good for women, companies, or society.
Many boardroom diversity policies cite studies by Catalyst and Credit Suisse. These studies not only demonstrate the currently very small number of female directors on boards, but show a correlation between having a greater proportion of the board made up of women and increased shareholder returns.
But as Adams pointed out, Catalyst, Credit Suisse, and McKinsey (whose studies are also quoted in the boardroom diversity debate) are consultancies, not academic researchers. How do their results stack up when compared with those of academic research conducted by Adams and her colleagues? In her lecture she investigated three of the biggest myths behind policy initiatives to increase the presence of women on boards.
MYTH #1: The proportion of women on boards is low
Adams compared data from Boardex, which consolidates information on boards from more than 90 countries, the Catalyst study, and the European Commission’s ‘gender‐balance in decision-making’ database containing data on the representation of women on the boards of the 50 largest companies on the major exchanges in each EU country.
The BoardEx data confirmed the findings of previous surveys, and then some. For example, the Catalyst data suggests that women make up 20% of boards of US companies: the BoardEx data pitches it even lower, at 12%. Similar figures were found in the EU and in the UK alone.
Quite simply, the BoardEx sample is much larger than the others (Catalyst looks at 500 firms at most, and the European Commission looks at a maximum of 50 companies in each country). As a result, it contains many more small firms.
‘Women are much more likely to sit on the board of large firms. There are fewer female directors than people think, and they’re all sitting on the boards of large companies,’ concluded Adams.