Three or more women directors on company boards results in significant improvement of company performance
Research from Newcastle University Business School has sparked investigation into the positive impact women directors can have on company boards.
28 March 2022
Gender balance in the North East
Our research with 81 women leaders at the very top of the FTSE100/250 and organisations in the North of England shows how women across the age range of 33 - 67-years-old can become Executive/Non-Executive Directors[1]. So what happens to company performance once women are there?
As our region’s aim is to grow and develop a more productive, inclusive and sustainable regional economy, how could a proactive strategy of inclusivity for women leaders impact positively on gender balance, company performance and influence the future of work?
If we want to improve North East gender balance and company performance then 3+ women on boards should make a difference: ‘one is a token, two is a presence and three is a voice’[2] of gender diversity in the boardroom.
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The impact of women
Here are some of the findings from a collection of research outputs demonstrating the impact women can have on company performance:
- There is an unequivocal highly significant positive effect on financial performance when 3+ women are appointed to the board of FTSE 100 companies.[1]
- Women’s boardroom presence leads to improvement in company performance measured by return on equity.[2]
- A ‘critical mass’ of 3+ women on boards results in increased managerial accountability.[3]
- 3+ women executives can change boardroom dynamics substantially, creating environments where innovative ideas can increase firm innovation.[4]
- Gender diverse boards commit fewer financial reporting mistakes, engage less frequently in fraud schemes[5] and improve the informativeness of data for stockholders and quality of corporate governance.[6]
- Cybersecurity has had big impact on our region - research shows positive association between presence/level of cybersecurity disclosure and board gender diversity but boards must boast at least three women before this is observed.[7]
- Board gender diversity reduces “old boys’ club” effects and groupthink mentality.[8]
Equip yourself to lead
Women play an integral role in the boardroom, but still face barriers to getting a seat at the table. Our Executive Education programmes are designed to equip senior leaders and managers to shape the future of business. Our part-time and flexible programmes fit around personal and professional commitments, so future leaders can thrive.
About the author
Professor Sharon Mavin is a Professor of Leadership and Organization Studies at Newcastle University Business School.
Sharon made the Northern PoWER Women PoWER List 2022 and was awarded the British Academy of Management Medal for Leadership in 2021. Sharon’s research covers themes around women at work, misrepresentation of women in the media and identity and gender.
Footnotes
[1] Mavin, S., Williams, J., Bryans, P., & Patterson, N. (2015). ‘Woman as a project’: key issues for women who want to get on. in Handbook of Gendered Careers in Management. Edward Elgar Publishing.
[2] Kristie, J. (2011). The power of three. Director Boards, 35(5), 22–32.
[3] Brahma, S., Nwafor, C., & Boateng, A. (2020). Board gender diversity and firm performance: The UK evidence. International Journal of Finance & Economics.
[4] Joecks, J., Pull, K., & Vetter, K. (2013). Gender diversity in the boardroom and firm performance: What exactly constitutes a “critical mass”? Journal of Business Ethics, 118, 61–72.
[5] Adams, R. B., & Ferreira, D. (2009). Women in the boardroom and their impact on governance and performance. Journal of Financial Economics, 94, 291–309.
[6] Konrad, A. M., & Kramer, V. W. (2006). How many women do boards need? Harvard Business Review, 84(12), 22.
Konrad, A. M., Kramer, V., & Erkut, S. (2008). Critical mass: The impact of three or more women on corporate boards. Organizational Dynamics, 37, 145–164.
Carolyn Wiley and Mireia Monllor-Tormos,(2018) “Board Gender Diversity in the STEM&F Sectors: The Critical Mass Required to Drive Firm Performance,” Journal of Leadership & Organizational Studies, vol. 25, no. 3.
[7] Wahid, A. S. (2019). The effects and the mechanisms of board gender diversity: Evidence from financial manipulation. Journal of Business Ethics, 159(3), 705–725.
[8] Baker, H. K., Pandey, N., Kumar, S., & Haldar, A. (2020). A bibliometric analysis of board diversity: Current status, development, and future research directions. Journal of Business Research, 108, 232–246.
Gul, F. A., Srinidhi, B., & Ng, A. C. (2011). Does board gender diversity improve the informativeness of stock prices? Journal of Accounting and Economics, 51(3), 314–338.
[9] Radu, C., & Smaili, N. (2020) Board Gender Diversity and Corporate Response to Cyber Risk: Evidence from Cybersecurity Related Disclosure. Journal of Business Ethics, 1-24.
[10] Van Knippenberg, D., De Dreu, C. K., & Homan, A. C. (2004). Work group diversity and group performance: An integrative model and research agenda. Journal of Applied Psychology, 89(6), 1008.
Wahid, A. S. (2019). The effects and the mechanisms of board gender diversity: Evidence from financial manipulation. Journal of Business Ethics, 159(3), 705–725.