Education and Skills

There really are no downsides to more female CEOs. Here’s why

Maria Silvia Bastos Marques, the chief executive officer of Brazilian state development lender BNDES, attends an interview with Reuters in Rio de Janeiro, Brazil, November 22, 2016. Picture taken on November 22, 2016. To match story BNDES-OUTLOOK/  REUTERS/Sergio Moraes - RC15CAC3E570

Research shows that greater board and leadership diversity has big benefits for companies. Image: REUTERS/Sergio Moraes

Kirhan Trehan
Professor of Leadership & Enterprise Development , University of Birmingham
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Female CEOs of large firms are a rare breed. In the US in 2015, there were more CEOs called John running big companies in the US than women. In 2016, there were only six female CEOs in the firms covered by the FTSE 100 index and 12 in the FTSE 250 index. In the FTSE 100, there were only four women chairs, 185 women on the executive committee out of 991 positions, and 283 board members out of 1,065 positions.

Share of female CEO's in 2015. Image: New York Times

There is a similar, but not as stark, underrepresentation in the UK public sector. For example, I recently published a report with Jenny Phillimore, Jane Glover and Yanan Zhang, which shows that in 2017 women made up only 13.1% of the directors of corporate boards in the largest West Midlands professional services companies and the public sector. Over half of the companies (55.9%) have male-only boards, whereas two companies have female-only boards.

This is despite the fact that West Midlands public companies have on average a higher proportion of women on their boards and in CEO positions than private companies – 15.6% compared to 12.9%. But this still lags behind the UK average for both the FTSE 100 (27.7%) and FTSE 250 (22.8%).

The level of inequality reflected in these figures offends most people’s sense of justice and questions the effectiveness of support for equal opportunities. This may be a sufficient reason to try and boost the number of female CEOs. But there is also an economic incentive for having more women in top positions.

A lot of research shows that greater board and leadership diversity has big benefits for companies. Much of this stems from widening the communication and networking skills, as well as leadership styles, that can be drawn upon.

Greater diversity brings new perspectives on markets and improved problem-solving skills. It also facilitates critical thinking. It is also shown to increase firm innovation through a diverse board’s ability to respond more creatively to changes in global markets and customer needs – women are now involved in 80% of consumer goods purchased and by 2025 women are predicted to account for 60% of all personal wealth.

One study found that companies in the top quartile for gender and ethnic diversity are 35% more likely to have financial returns above the industry average. This is because gender diversity was a proven asset in relation to brand image, customers, shareholders and employee satisfaction.

Widening the talent pool

The lack of women in top positions also indicates that firms could do much more to develop the talent that is lying unused among their employees and which is therefore wasted. This talent pool would likely include more collaborative and supportive “female management styles” which research shows is more prevalent among female leaders and is both underused and beneficial.

Women leaders have also been shown to develop innovative approaches to mentoring such as peer-to-peer and reverse mentoring. These are powerful tools for building bridges into leadership. They are both effective at unlocking potential within businesses as they create space for reflection, connection, critical insight and knowledge exchange. As a business benefit, mentoring is also crucial for having more engaged and motivated employees.

The presence of more female CEOs in some organisations is an indicator that private and public organisations are implementing policies and practices that promote gender diversity at all leadership levels and that they understand the importance of nurturing the leadership pipeline. Too often, companies have the attitude that one women on a board or in a position of seniority is enough. But more women are needed at every level of leadership in a company.

There is also evidence that more women at a senior leadership level are associated with better female representation at the level immediately below. This is likely to be more than positive role models giving confidence and encouragement to women aiming to advance their careers. It could also be a consequence of better staff development policies which address diversity and provide mentoring, coaching and other support. This leads to better representation of women more widely across the business. Not only does this make things more equal, it brings with it economic and social benefits.

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