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Women On Boards: Is there a critical mass beyond which women directors influence company performance?

Welcome to 2013!  In my usual style, I’ve set a theme for the year and it’s a theme that will permeate through everything I do including this blog: 2-0-1-3 it’s all about Simplicity.  For the blog this means, simply, that I’ll attempt to cover a different theme every week, in short sharp posts, starting this week with Women On Boards.  Much has been written in recent years about the importance of women on boards, how to boost the number of women holding directorships and whether it’s time after all for quotas.  So my first post for 2013 examines this question: is a critical mass beyond which the presence of women on a board influences a company’s performance?

This question was posed last month, at the American Economic Association conference in San Diego, Ca., by Miriam Schwartz-Ziv, an economist at Northeastern and Harvard Universities.  Schwartz-Ziv examined the detailed minutes of 402 board- and board-committee meetings of Israeli companies with a substantial share of government ownership — where thanks to
a gender-diversity law, women hold roughly 37 percent of directorships.

Significantly, she found that:

  1. Boards that had critical masses of at least three female directors in attendance were approximately twice as likely both to request further information and to take an initiative, compared to boards that did not have such critical masses.
  2. The ROE and net profit margin of these type of companies is significantly larger in companies that have at least three women directors.
  3. Boards that included a critical mass of women directors were more likely to experience CEO turnover when firm performance was weak.
  4. At the level of the individual directors, both men and women directors were more active when at least three women directors were in attendance.

To review the full findings of Schwartz-Ziv’s study, click here.

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