Leadership

Why having more women leaders increases company profits

Image: Thailand's Prime Minister-elect Yingluck Shinawatra meets with her economic team at the Puea Thai Party's headquarters in Bangkok. REUTERS/Sukree Sukplang.

Jenny Anderson
Senior Correspondent, Quartz - Atlantic Media
Share:
The Big Picture
Explore and monitor how Gender Inequality is affecting economies, industries and global issues
A hand holding a looking glass by a lake
Crowdsource Innovation
Get involved with our crowdsourced digital platform to deliver impact at scale
Stay up to date:

Leadership

Advocates for gender parity like to argue that equality is not just about fairness, but also about better business results.

New data from the Peterson Institute for International Economics and EY bolsters that case. The groups analyzed results from 21,980 global, publicly traded companies, in 91 countries from various industries and sectors and showed that having at least 30% of women in leadership positions, or the “C-suite,” adds 6% to net profit margin.

Source: Peterson Institute for International Economics

“The evidence on women in the C-suite is robust: no matter how we torture the data we get the same result: women in the C-suite are associated with higher profitability,” Marcus Noland, director of studies at the Peterson Institute, told Quartz in an email.

The study looked at women in three positions: CEO, board members, and members of the C-suite. It found female CEOs do not systematically outperform their male counterparts. While there is some evidence that female board members are associated with greater profitability, the results are not statistically significant. But the C-suite results were clear: more women translated to higher profits. And Noland argues that having more women on boards is associated with having more women in leadership, otherwise known as the “pipeline effect.”

Laura D’Andrea Tyson, an economics and business professor at the Haas School at the University of Berkeley, told a panel at the 2016 World Economic Forum that the gender parity debate is wrongly focused on fairness. Women, she argued, improve innovation and complex decision-making. “We have failed to make the business case,” she said.

This study may help.

Its critical weakness is that it is one snapshot in time, 2014, and not longitudinal. But it reveals there’s more than enough room for improvement in getting to parity:

-60% of companies had no female board members (13,017 firms)

-Just over 50% had no female leaders (“C-suite”) (11,802 firms)

-4.5% had female CEOs

-3.8% of board chairs are female

Having women leaders happened in companies which were bigger, in countries where women did well on math assessments vis a vis their male counterparts, and where there was a relative absence of discriminatory attitudes.

Surprisingly, countries that provide mandated maternity leave do not have more female leaders. But those with more paternity leave do.

“It stands to reason that policies that allow for child care need to be met, but do not place the burden of this care explicitly on the woman, can allow women to have a greater chance of building business acumen and professional contacts necessary to advance to a level at which they would be invited to be part of a corporate board,” the study said.

Another discovery that will fuel policy discussions: quotas to mandate female representation on boards do not reduce, or improve, corporate performance. The study dispels the argument that quotas will lead to the same women sitting on the same boards (the “golden skirt” effect). Women who sit on multiple boards are no more common than men: 13% of male directors sit on two boards compared to 12% of women; 3% of each sit on three boards; and less than 1% of each gender sit on more than four boards.

“Golden pants” are as prevalent as “golden skirts,” which could be interpreted as one measure of parity that we’ve accomplished.

Don't miss any update on this topic

Create a free account and access your personalized content collection with our latest publications and analyses.

Sign up for free

License and Republishing

World Economic Forum articles may be republished in accordance with the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License, and in accordance with our Terms of Use.

The views expressed in this article are those of the author alone and not the World Economic Forum.

Related topics:
LeadershipGender Inequality
Share:
World Economic Forum logo
Global Agenda

The Agenda Weekly

A weekly update of the most important issues driving the global agenda

Subscribe today

You can unsubscribe at any time using the link in our emails. For more details, review our privacy policy.

3 ways leaders can activate responsible leadership in uncertain times

Ida Jeng Christensen

April 8, 2024

About Us

Events

Media

Partners & Members

  • Join Us

Language Editions

Privacy Policy & Terms of Service

© 2024 World Economic Forum