WOMEN IN BUSINESS 7 March 2019
Women in Business Matters LOUIS NAUDI Hon. Professor, Fellow, Chartered Institute of Marketing. A committee member of Women Directors Malta and representative on the Consultative Council for Women’s Rights.
oard directors oversee the affairs of and maximise a company's business, by collectively directing its affairs and simultaneously meeting the interests of shareholders and stakeholders. These includes business and financial issues such as determining the business strategies and plans that underpin the corporate strategy; ensuring the company’s structure and capability are appropriate for implementing chosen strategies; and issues relating to corporate governance, corporate social responsibility and corporate ethics. The question we need to ask therefore is “If a key role of a Board of Directors is to increase business performance, leading to maximising shareholder value, why then are capable women not appointed to more boards in Malta despite the clear evidence?” Using well quoted data, Malta is more significantly underrepresented in both corporate boards and management positions compared to the EU average. The female share equals 3.0% in Maltese boards (EU-27 average 14.0%) and 20.0% in management positions (EU-27 average 33.0%).
number of women – since 2005 – sitting on the boards of the 2,360 companies constituting the MSCI AC World index. The outcome shows that, “over a six-year period, companies with at least one female board member outperformed those with no women on the board in terms of share price performance.” Recent research by Kris Byron and Corinne Post 2016, examined conflicting research about whether the presence of women on company boards improves financial performance. They conducted a meta-analysis of the research in which they combined 140 studies spanning 35 countries and 90,000 firms, the results of which were published in the Academy of Management Journal.
The key findings Firms with women on their boards were more profitable. They uncovered two reasons why “Boards with female directors tend to make stronger efforts to monitor the firms. They spent more time in board meetings and were more likely to make efforts to monitor the CEO and the firm in general.” They also concluded that” boards with more female directors are more likely to be concerned with and involved in influencing the firm’s The Business Case is Clear: strategy.” Since 2004, an extensive but inconsistent They suggested that “efforts to ensure body of research has demonstrated that director accountability and to open diverse teams sustain higher and more educational and employment opportunities consistent performance over longer periods to women may provide the conditions that and organisations that aggressively promote will motivate firms to select female directors women to executive positions, have stronger for their performance-enhancing potential.” financial performance with one quarter to A further huge study found that companies one third higher profits than their industry with more women leaders were more average. profitable. New data from the Peterson Catalyst (The Bottom Line: corporate Institute for International Economics and performance and women’s representation on EY, 2016, strengthened that case. The boards) looked at three critical financial groups analysed results from 21,980 global, measures, comparing the performance of publicly traded companies in 91 countries companies across most industries with the from various industries and sectors and highest representation of women on their showed that having at least 30% of women in boards to those with the leadership positions, or the lowest representation. “C-suite,” adds 6% to net • Return on Equity: On profit margin.” average, companies with “The evidence on women in the highest percentages of the C-suite is robust: no women board directors matter how we examine the outperformed those with data we get the same result: We have failed to women in the C-suite are the least by 53%. • Return on Sales: On associated with higher make the average, companies with profitability.” The C-suite business case the highest percentages of results were clear: “more women board directors women translated to higher outperformed those with the least by 42% profits”…and that “having more women on • Return on Invested Capital: On boards is associated with having more average, companies with the highest women in leadership, otherwise known as percentages of women board directors the pipeline effect.” outperformed those with the least by 66% Should shareholders be concerned that Finally, Credit Suisse Research Institute in profits are not being maximised by its board a 2012 study (Gender diversity and corporate directors? The answer to that is yes. So why performance) compiled a database on the is there a clear contradiction between the
composition of boards in Malta and their ability to achieve the best results for shareholders and stakeholders? Advocates for gender equality have argued largely on the basis that this is not just about fairness, less so about better business results. Professor Laura D’Andrea Tyson 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 decisionmaking. “We have failed to make the business case”. Finally, McKinsey (2015) stated “Gender equality is not only an issue of fairness but also….a matter of attracting the best workers, at least half of whom are women. Diversity needs to be positioned as a business priority, a push that unites progressive, futureoriented leaders in a common cause: the performance and sustainability of their business.”
Dr Michelle Gialanze – President – Women Directors in Malta
Women Directors Malta(WDM) Since 2015, Women Directors Malta (WDM) has consistently argued that women from all backgrounds in Malta should have equal opportunity and access to board level vacancies, a level playing field, free from bias, based on commercial needs, skills and ability, not simply on gender. WDM believes the debate about more women directors on boards should focus on the business arguments, not on gender. Shareholders need to be educated on the correlation between gender composition and profitability.