Why You Should Prioritize Increasing the Number of Women on Your Board

“Having more women on boards leads to higher returns.”

Over the last decade especially, myriad studies have been pushing results and data that underscore and supposedly prove why this is true.

While various media have referenced these reports, such statistics have also come under intense scrutiny, with many experts disputing claimsOpens a new window that more women on boards will inevitably improve organizations’ bottom line.

Focusing on financial results may be the best way to encourage debate on the need for more equality and diversity at the C-suite, but such a categorical conclusion simply can’t be proved.

Demonstrating cause and effect is too difficult; most, if not all, of these corporate reports admit that the evidence they put forward generally fails to prove that having more women in boardrooms is the pivotal aspect leading to better financial performance.

For instance, company size is a key factor that influences profitability, and bigger firms tend to have more female employees at every level of their organization. Ultimately, arguing that more women on the board is the driving force for better returns is simply naive and doesn’t take other potential causal factors into consideration.

In fact, many business academics have performed in-depth analyses that highlight only very slight, if any, positive connections between female board members and revenue. Crucially, the results across the companies studied showed negative, neutral and positive correlations, which would suggest that categorical promises of elevated earnings are misleading.

In my view, proving whether or not more women on the board generates higher revenue is a fool’s errand, and a conversation that misses the real point of why companies must ensure they have more women in their boardrooms: They contribute positively to overall operational performance.

The power of three

First, let’s look at the science that explains why it’s crucial to have more than one or two women in this position of power.

A single female board member risks being seen by her counterparts as an outsider, the marginalized, token female who sticks out like a sore thumb yet somehow invisible among all the men in the room. It’s too easy for the contributions of a lone woman to be ignored, passed over or diminished, rendering it nearly impossible for her to influence the boardroom culture, not to mention its decisions.

Raising the female board membership to two still isn’t enough to affect a meaningful shift in culture. Research has shown that two female board members often shapes an “us-versus-them” situation – if the women agree on an issue, they risk being perceived as conspiring against the rest of the board. As such, some women in this situation reportedly become hyper-vigilant to avoid creating this perception.

Unfortunately, misogynistic biases are more prevalent when there are less than three female board members. And although pervasive gender discrimination is really the issue, we can’t expect to change this inherent cultural sexism right away.

Better to jog before sprinting – so a good place to start is for HR to push for a set minimum number of women on a boardOpens a new window .

There’s momentum in this direction, such as the recent California billOpens a new window that will require the state’s publicly held corporations to include women on their boards by the end of next year. While a good start – it’s just a start.

Considering the relevant evidence suggesting that three women on a board is the magic number – the tipping point for them to contribute freely, be heard and valued by their colleagues, and have real influence on a board – it’s sobering to find out that only a quarter of companies in the S&P 500 have more than two women on their board.

The pros

Companies with more women directors have been found to reap substantial rewards.

Consider some of the ways boards with more gender diversity have been found to be more innovative, strategically-focused, and generally more effective:

• Women directors help ensure a board better represents all stakeholders (employees, customers, shareholders and the community).
• More women in a boardroom limits a company’s risk as they tend to focus on long-term priorities.
• With up to 80% of consumer purchase decisions in the US being driven by women, having more female board members helps to develop products and services that better target this demographic.
• Women are more collaborative than men.
• Some research supports that female directors positively impact corporate social responsibilityOpens a new window , encouraging environmentally-friendly company practices. (And these days, doing good is good for businessOpens a new window ).
• Women directors are an important symbol for other women in the company, improving their performance and shaping a better, more inclusive company image.

The cons

There are none. Zero.

Get your organization’s head out of the sand and embrace the fact that if it hasn’t already, it needs to get more women on the board.