Co-authored by Vedrana Jelušić Kašić
Global economic challenges and long term business trends are reshaping the role of the future corporate leaders. The need for increased female leadership has been one of the focal topics within the international business community throughout 2015. Still, despite the attention that the issue has attracted, the progress has been slow and the reality remains quite grim.
According to the data published by Catalyst in December, women currently hold 4.2 percent of CEO positions at S&P 500 companies with only 12 percent of the board seats held by women worldwide, equivalent to the share of board seats held by women in the US as per the latest Deloitte Global research conducted at 6,000 companies in 49 countries in 2015. In Croatia, November data show that women make about 16 percent of management boards. Basic misunderstanding of opportunities related to promoting and enforcing gender equality in the business arena still seems to exist.
There are multiple reasons why these findings raise concerns and underline the continued need for further emphasizing of the economic benefits generated through greater diversity and inclusion. Most importantly, if significant part of the population is not economically engaged to its full potential, it is a loss of the most precious and scare resource -- human capital. Women represent over 50 percent of the university educated workforce and furthermore, are accomplishing top scores in business schools and MBAs worldwide. Women also make the majority of the household spending and family investment decisions. A diverse and balanced corporate leadership is more effective and innovative, which further supports the case of disrupting the traditional, anachronistic, and male-centered model of leadership. Nonetheless, women are still struggling to break through the "glass ceiling" while climbing the corporate ladder.
The roots of female under-representation in senior leadership positions are multifold -- prejudice, gender stereotypization, social unawareness, and lack of political will, all amount to the perpetuation of the predicament.
As per MSCI Research, it would take until 2027 for women to reach 30 percent of the board seats globally. Thus, the question remains -- what can be done to facilitate faster progress and greater inclusion?
The success of legislative intervention
The European examples show that legislative intervention is one of the ways to go. In 2003 Norway was the first country in the world to impose a gender quota requiring firms to increase proportion of the women on their boards to 40 percent. Other countries such as France, Holland, Belgium, Italy followed. The evidence shows that in three years, from 2010 to 2013, a significant improvement in gender equality was registered in 22 out of 28 EU Member States with France, Holland and Germany reporting the most progress, with an increase of women on boards with 17 percent, 10 percent, and 9 percent respectively with an average of 17.8 percent board seats held by women in 28 EU Member States. Today, Norway has one of the best records with women holding above 35 percent of the board seats on Norwegian stock index companies, showing how the policy can be a successful tool.
Still, legislative intervention alone is not enough to generate a broader social shift towards the establishment of a new norm of inclusive leadership. At the top management level, it is important to promote benefits and values created by inclusion and diversity. Self-regulatory corporate measures are vital step on the path of creating the new culture of inclusive leadership. The companies with highest standards of corporate governance are developing corporate gender strategies which include formal board policies ensuring adequate board compositions with diverse expertise and perspectives. The modern corporate leaders are committed to continually recruiting diverse resources and investing in developing female leadership within their own companies. By doing so, they tap into a much wider pool of talent and build an effective organizational culture. Initiatives such as the Global Board Ready Women and the European Network for Women in Leadership have an indispensable role in identifying and promoting female leadership.
Board diversity yields higher (equity) returns
Insisting on gender diversity of corporate leadership is backed by sound financial reasoning. Increasing the number of women in companies has been proven to increase performance as well as innovation. According to the latest findings based on the data collected from 1,643 companies that make up the MSCI World benchmark, there is a definite upside from increasing board diversity. The research shows that companies with more women on their boards delivered a 36 percent better return on equity since 2010 than companies with less gender balanced boards.
Gender diversity on corporate boards is gaining momentum around the world. At a time of growing economic uncertainty, the imperative of mobilizing all available talent has never been so pressing. From a micro perspective, the gender underrepresentation at supervisory boards can hurt corporate performance. On a macro level, it weights down national economies and promotes a negative corporative narrative for young female talent worldwide. Strong political will and support play crucial role in achieving this positive change. Only those societies that integrate the underrepresented groups in their economies can achieve long term sustainability.
As women continue to shatter stereotypes by assuming leading roles in social, business, and political arenas, it is time for corporations to unequivocally endorse and advocate gender equality at the highest corporate level -- wasting the talent and opportunities emerging from inclusive leadership is a luxury that companies and economies can no longer afford, and should no longer tolerate.
Vedrana Jelušić Kašić is the Director, Croatia, of the European Bank for Reconstruction and Development