Why do corporate boards need more women?

The Global Women’s Leadership Programme (GWLP) at Bayes Business School hosted its first in-person event since the start of the pandemic at its Bunhill Row campus on the topic of women on corporate boards. Moderated by Dr Janina Steinmetz, Reader in Marketing and GWLP Director, the panel investigated why boards need women and the career path to get there.

Professor Elena Beccalli, Dean of the School of Banking, Finance and Insurance at the Catholic University of Milan was invited as a panellist to share her expertise and first-hand experience of sitting on the Boards of two Italian banks.

She was joined by Professor Barbara Casu, expert in banking and finance and Director of the Centre for Banking Research, whose research has found that gender-diverse boardrooms reduce bank misconduct.

Fellow panellist Dr Sonia Falconieri, Reader in Finance, co-authored research that found enforcing gender quotas accelerates gender balance in boardrooms without impacting their quality.

Fourth panellist Dr Hans Frankort, Reader in Strategy, has researched new board appointments in the FTSE 100, with a particular interest in how appointment trajectories differ between male and female directors.

The business case and the moral case for gender-equal boards

There is a business case for improving gender diversity on boards: having women at the helm of boards leads to better business outcomes, according to research by Professor Casu.

Professor Casu’s research found banks with more women on its board commit less fraud, make more environmentally-friendly decisions and have better accounting and reporting practices.

Professor Casu theorises this may be for a number of reasons. “According to gender socialisation theory, women are more likely to consider the needs of others. Looking at boards, this means that they are more likely to respond to the needs of their wider stakeholder community, whereas their male peers might focus more on shareholders,” she said.

She also suggested that this does not mean women are inherently more ethical than men, but rather that women might have a greater fear of punishment as they face greater consequences if caught acting unethically. This theory is known as the gender punishment gap and states that women are generally held to a higher standard than men.

In addition to the business case, there is a moral case for gender-equal boards, building on the notion of fairness and equal representation.

Enforced gender quotas

Certain countries, such as the UK, have adopted a voluntary approach to promoting gender parity on corporate boards while others, such as France, Italy and Norway, have adopted a mandatory approach.

In the UK, companies are encouraged to achieve a 33 per cent female ratio on FTSE 100 and FTSE 250 corporate boards but this remains on a voluntary basis. In France, Italy and Norway, companies who fail to achieve gender equality targets face financial penalties.

Dr Falconieri believes that no matter the approach, the ultimate outcome of higher female representation can only be a positive thing. Her research found enforced gender quotas accelerate the attainment of gender balance in corporate boards, deters non-compliance more effectively and saw no evidence to suggest that the quality of boardrooms therein suffers. She noted that Norway first trialled a voluntary approach in 2003, but found progress unsubstantial and switched to a mandatory approach in 2006.

Alternative measures for encouraging female board membership

For detractors of the gender quota approach, Dr Steinmetz asked the panellists what other measures could be implemented to boost the ratio of women on corporate boards.

For Dr Frankort, making data public and using metrics is a crucial part of progress. “Sunlight is the best deterrent,” he said.  “We must use the data we have to make these issues more visible, as companies do not want to be named and shamed.” This approach was used on Twitter in March this year, when an AI Twitter bot shared the gender pay gap of every company that Tweeted about International Women’s Day.

In Professor Beccalli’s experience, having a female chairperson is an important step to ensuring more women are elected to corporate boards. Noting the pipeline issue, she strongly suggested women focus on their education and encouraged young women to pursue STEM studies.

Professor Casu echoed this point, noting that many young women do not aspire to board membership or STEM and finance roles as they do not have role models to look up to. To combat this, she goes into secondary schools to speak to women about the many different career paths in finance.

During the Q&A portion of the evening, an audience member shared her experience of taking part in a board apprenticeship and said it gave her the experience she required to move into corporate board role.

GWLP coordinates scholarships for female students, organises skills-based workshops, disseminates research and develop speaker and panel events about gender-balanced research.