Gender Balance Board, Women Leadership, Sustainability, CSR, Firm Performance
Looking at the importance of the CEO and board of directors (BOD) in an organization in determining environmental strategy, research on leadership emphasizes on the demographic features of corporate leaders to recognize the structural factors that are related to greater environmental responsibility (Post et al., 2011). According to Hunter et al, (2004) when compared with men, women exhibit a sturdier commitment to environmental sustainability and they are more responsible towards environmental practices at the cost of higher personal costs. Feminist scholarship that investigates differences in gender talks about the value orientations of men and women to be different and also recommends that socialization impacts the behavior of men and women in various contexts. Socialization impacts the way women tend to be more concerned about other people, while men are expected to be more socialized, tend to be autonomous, be individualistic, and also apparently be more competitive (Chodrow, 1974). The value-in-diversity (Cox 1993) perspective asserts that a diverse workforce, as compared to a homogeneous one, is normally advantageous for a business, but this advantage is just limited to corporate profits and income. Today the picture is such that, women want to put work at the forefront and family to the second. Most of the women in the workforce are engaged, building careers, and not just doing jobs for the sake of a job. In such a scenario when human resources are becoming greatly heterogeneous, enterprises are competing for human resources, because being unable to cater to the diversified needs of the diverse workforce, they have to do their best or lose the workforce to their competitors. Thus, among other kinds of diversity, gender diversity at the workplace is a buzzword. A gender-balanced team comes with greater expertise at work, has better industry knowledge helps the company admittance to more resources, and provides numerous channels of information. With this vision, companies are recruiting women employees, promoting women employees, and creating a dedicated pool of talented women workforce. However, as per the European Commission Report 2012, the average board representation of female directors was only 13.7%, which is not satisfactory in terms of gender diversity.
Still looking at the studies conducted at the organizational level, the proportion is not highly satisfactory. Whatever research has been done, does not assert that the impact of women’s engagement in the workforce has had an impactful effect on the performance of the firm. Though the value-in diversity model advocates the benefits of gender diversity at work, Critics of the diversity model, however, are doubtful about the degree to which these benefits are worth (Rothman, Lipset, and Nevitte 2003a, 2003b; Skerry 2002; Tsui, Egan, and O’Reilly 1992; Whitaker 1996). Tsui and colleagues (1992) have been found to concur that diversity weakens group cohesiveness and, as a negative impact to, absenteeism at the workplace increases and turnover also upsurges. Thus the gap in research is identified from the fact that the connection between gender diversity and corporate performance is not well explained and justifies more consideration. This also has to be admitted here that studies conducted in the period between 2004 and 2006 made attempts to connect gender diversity and advanced corporate performance so that enhanced gender diversity in the corporation can be defended from a financial angle. To go a little back, during the years 1980s and 1990s female participation in labour markets worldwide rose quite considerably, but that however did not result in improved job quality (ILO, 2007).
With this background, this exploratory study based on secondary published research articles seeks to interpret extant academic research on gender diversity and corporate performance and develop a theory to link with research findings. In short, the objective of this article is to examine the impact on firm performance in the presence of women on the board of directors.
Does Gender-Balanced Board Impact Corporate Performance?
A large number of studies have investigated the influence of board composition on the value of the firm. Of late, researchers have begun to examine the impact of board diversity, which may be defined as the variety inherent in the board’s structure. This variety can be measured on several dimensions: gender, age, ethnicity, nationality, educational background, industrial experience, and organizational membership, among others. Concerning gender, specifically looking at women on board, which is debatably the most debated diversity matter and corporate performance, the following section tries to have a glimpse of the existing literature.
Corporate Governance and Women Leadership
The term corporate governance refers to ‘‘the system by which companies are directed and controlled’’ (Cadbury Report, 1992). The board of directors is an important governance mechanism, although the nature of the alignment between different interest groups is also partly determined by the legal environment. The studies related to corporate governance and women have tried to link women’s representation on the boards of companies around the world and in most of the studies this representation is uneven. Though this number is uneven, studies conducted on women employees show that women workforce tend to display greater consideration of environmental behaviors (Hunter et al., 2004) and also to climate change (Ciocirlan and Pettersson, 2012), and have more optimistic work-related behavior (Selvarajan et al., 2015). If looked at from a theoretical perspective, both agency theory and stakeholder theory would justify the presence of a heterogeneous board (Carter et al., 2003; Arfken et al., 2004; Konrad et al., 2008; Adams and Funk, 2012). Of late, a law has been passed by Germany declaring publicly listed companies should have women occupy at least 30 percent of managerial seats as of 2016. Similar quotas have enhanced the number of women on boards of Europe’s largest publicly listed companies. In India, just a handful of the top 500 companies would have a woman on their board. Looking at the Indian scenario, the top 500 companies have a minimum of women representation on board. If questioned, why is this so, and what is the chief barrier towards adequate representation, could this be attributed to a lack of sufficient talents among women in terms of education, the best ideas, resources, skills, and best practices that will contribute perceptibly on shareholders return and build a enduring company with sturdy value and principles? Looking at a report by Deloitte India which covered 132 companies, it has been found that the number of women on boards in India improved by 4.7 percent to 12.4 percent in the previous two years. The revised Companies Act approved in August 2013, declared it compulsory for all listed companies and other big public limited firms to have at least one woman director in their boards. The same was amended by the Securities and Exchange Board of India (SEBI). The report has also revealed a suggestion between female leadership — CEOs and board members to board chairs held by women (The Economic Times, 2017). In a report Corporate India: Women on Boards (2017), it had been recommended that companies should target to obligate 20% of their boards involving women by 2020, but that has to be preceded by companies attempting to have at least one woman independent director on their boards within the next 18 months. As per regulators are concerned, gender diversity on boards is a high priority. Women’s representation in the boards has been justified with the positive perspectives of intuitiveness and a more collaborative leadership style. Though globally women in corporate governance are in progress, but the speed at which it is moving is glacially slow. International Finance Corporation (IFC) has made attempts to build capacity, develop awareness, give training, and expand the discussion about gender diversity on boards in many developing countries. IFC has also been exploring the reasons for women’s underrepresentation in boards. As welcome interventions, IFC has organized training to hone their women’s skills in risk governance, financial literacy, and board strategizing in Bosnia, Herzegovina, Macedonia, and Serbia. In Kosovo, they have run an educative comprehensive program to empower young women from non-financial SMEs. In Indonesia, they held the country’s first roundtable dialogue on the part of women on boards. In Vietnam, IFC has been engaged in helping in the formation of Women Corporate Directors’ chapters in Hanoi and Ho Chi Minh City. All these lead to the understanding that women on boards is a highly desirable policy and various reports on women in corporate governance show how investing in women’s board engagement has led to enhanced business performance and productivity for companies in diverse countries and sectors.
Women continue to face many barriers on their way to the top. A McKinsey Study in 2010 on Women Matter surveyed 1500 executives and identified two main barriers to gender diversity.
Does business need more women to meet Sustainable Development Goals
All 17 of the Sustainable Development Goals articulate gender response and Goal 5 of the SDG focuses on women’s empowerment and inclusion in decision-making. The UN 2030 Agenda for Sustainable Development, includes six targets and three means of putting them into practice. The first question that comes to mind is, will all the SDG goals be met?
The SDGs need to be seen as a springboard and not an end itself. Moreover, the business rules should change dramatically to bring a change in the global economy. Only GDP growth is not going to get a nation to achieve sustainable development goals. The development of women matters both for economic development and human rights. Inequalities have widened across and within many countries, even after high rates of economic growth. Disparities are caused by age-old practices, which are unjust and narrow the social fabric. Though women’s representation has improved in politics, leadership roles, breaking stereotypes, and societal frames, gender discrimination continues and women are prone to deeper disparities.
Globally women earn 24% less than men, with varied gaps between countries. Many women are at risk of violence at home and work. Women’s ability for employment and productivity is severely challenged because of societal expectations of women. Women are under-represented in decision-making positions. Women manage over 30% of all businesses but this tends to concentrate in micro and small enterprises.
According to the ILO global report of 2017, if women participated in the economy identically to men, it would add up to US$28 trillion or 26% of annual GDP in 2025. And when we talk about women’s development it doesn’t mean only women in boardroom or corporate, it also includes domestic workers. Formalization of the informal economy creates social protection and reduces discriminatory practices and that is why women are required to meet sustainable development goals.
An in-depth interview of 57 female CEOs by Harvard Business Review in 2017 showed that women have worked harder and longer to get to the same place. They were four years older when compared to their male counterparts. Women’s exposure to different roles, functions, and companies was more compared to men. Most women leaders believe that they are motivated by a sense of purpose and they have a more positive impact on their community.
Business requires more women because they can successfully navigate ambiguity and complexity and these qualities are desired for CEO roles. Women harness the power of others to achieve the needed results and have the humility to help others and seek other’s help. This is all about community, conservation, and cooperation.
There is a positive connection between women in business and sustainable business goals. Goal 5 on Gender Equality and Goal 8 on Decent Work and Economic Growth directly address women’s issues in development. It is also been observed that women drive better sustainable goals like (1) Poverty, (2) Zero Hunger, (3) Good Health, (4) Quality Education, (16) Peace and Justice, and (17) Partnership for the Goals. Women accomplish these goals better as they believe in commitment to a purpose. The argument that women can drive these goals better stems from the six leadership qualities women have, (i) long-term thinking (ii) innovation in a personalized approach, (iii) collaboration, (iv) transparency, (v) environment management and (vi) social inclusion.
By more women’s engagement in SDG, both leadership and economic development can be achieved. It’s a matter of human rights and what is right for women is right for Sustainable Development.
What Makes Women Leadership More Conducive to Business Sustainability
Not only it is a matter of fact but proven through research that suggests that “companies with more women leaders have generally more committed leaders, engages into corporate social responsibility” —perhaps women are better at, compared to their counterparts and with more number of women in leadership positions, companies are expected to do more on CSR activities. Despite their crucial societal role and confirmations of their economic command, women still have a risk and lack access to equivalent opportunities when compared to men counterparts. With gradual increments, businesses can bring to women’s economic empowerment. Should women’s leadership be linked with business sustainability? To answer this research question let us look at the personal characteristics of women that make them different from men. There are the nine leadership qualities needed to advance in any business. Nine leadership behaviors are identified through research that leads to sustainable business performance, they are participative decision-making, role model, inspiration, expectations and rewards, people development, intellectual stimulation, efficient communication, individualistic decision-making, control, and corrective action. They are derived from the Mc Kinsey Report. Some leadership behaviours have become extremely important to encounter future business challenges.
Among all the nine leadership behaviors studied, the trends that follow for women leadership are that three patterns emerge.
Whilst acknowledging that enterprise needs leaders of a wide variety — men and women — to champion sustainability, the business commission cites robust support that women leaders display a proclivity to behave on some problems. consistent with Korn Ferry, woman CEOs are prompted through motive and tries to have a tremendous effect on their personnel, network and the world. A slew of researches have scrutinized reasons for women and sustainability of business and landed up with the supposition that women embrace qualities that assist sustainability, social sensitivity, holistic thinking, emotional intelligence and empathy to name a few. As leaders, women have a tendency to be greater stakeholder centered and long-term oriented than men, even on the cost of short- term income (Matsa and Miller, 2013; Silverman, 2003). If we look at an example, women are sometimes higher in a position than men to combine the interests of several stakeholders, consisting of groups, employees, suppliers and customers, with the overall performance-primarily based interests of shareholders (Brammer et al., 2007; Harrison and Coombs, 2012). In reality, stakeholder-orientated groups tend to employ a relationship-primarily based leadership style that places more importance on constructing integrated, long-term strategic connections with stakeholders, instead of truly monetary profits for shareholders (Svendsen, 1998). If feminine (or right-brain) leadership has vast blessings for sustainability, then we need to grow to be invested in persevering with this discussion — irrespective of how easy — as a way to identify and domesticate those benefits.
Summary
Summarizing the research so far, we can again claim that the results are promising yet mixed. There appears to be an association between women’s leadership and environmental sustainability, but not a very strong one. Further, this leadership is more evidenced in the role of women on the board of directors than in women CEOs. The possible reason for this could be the scarcity of women CEOs. Still, it also points to the importance of the board of directors in exerting an influence on the environmental performance of companies, as well as the role of women directors in these efforts. We encourage researchers to take this into account in fashioning research efforts in this area in the future. The good news is that the proportion of women directors is ascending, albeit slightly sluggishly. An enhancement in gender balance on corporate boards of corporations would become easier to realize in the current climate.
