Imagine running an oil company where only one or two of the directors on your board have oil industry experience. Imagine running a computer company where none of the board uses a computer, tablet or smart phone. Now imagine corporate America running their businesses where less than 15 percent of their boards are women.
Women are not a minority except in terms of their parity with men on corporate boards. While women account for over 50 percent of college graduates and they dominate economic power in our economy with $8 trillion of annual buying power, they still account for less than 15 percent of S&P 500 boards of directors. Three percent of Fortune 1000 companies have no women on their board of directors. For the next tier of 1,000 midsize companies the level of ZERO women representation on the boards jumps to 30 percent.
The business case for women directors
Women serving on the board of directors is a best practice for winning business success. Research by Catalyst documents that Fortune 500 companies with women on their board of directors achieve the following superior business results:
- Higher Return on Equity: On average, companies with the highest percentages of women board directors outperformed those with the least by 53 percent.
- Superior Sales: On average, companies with the highest percentages of women board directors outperformed those with the least by 42 percent.
- Higher ROI: On average, companies with the highest percentages of women board directors outperformed those with the least by 66 percent.
Catalyst’s research found that the companies with the best financial results were achieved by companies with more than three women board of directors.
Women board of directors enable sustainable business results
Sustainability is a core business attribute being adopted by companies across industries including Ford, HP and Clif Bar. Sustainable best practices are proving to reduce supply chain risks, lower costs, deliver more reliable customer service and increase sales. Sustainability is also proving to be a key path for winning millennial generation customers. A growing number of companies including Chipotle, Tom’s Shoes and Unilever are winning millennial generation customers by aligning with this generation’s focus of being cool with a purpose.
Kellie McElhaney, the Whitehead Faculty Fellow in Corporate Sustainability for the Haas School of Business at University of California, Berkeley and Sanaz Mobasserir, a PhD candidate at the Haas School, conducted original research on female board of directors and corporate sustainability. They investigated the corporate performance of more than 1,500 companies across three main categories of environmental, social and governance. Their key findings were that companies with more women on their board of directors are more likely to:
- Invest in renewable power generation and to proactively take steps to improve operational energy efficiency
- Have integrated climate change into their actuarial models and developed products that help customers manage climate change risk
- Measure and reduce carbon emissions of their products
- Have supplier programs to reduce their supply chain carbon footprint
- Reduced the environmental impacts of their packaging
- Address environmental risks in their financial decisions
- Not disturb large and/or fragile areas of biodiversity
The emerging evidence is that women on a company’s board of directors are helping their companies better serve their equity owners’ interests through enhanced environmental, social and governance risk-positioning.
Exclusive interview with Kellie McElhaney
The following exclusive interview with Kellie McElhaney was conducted at the Sustainable Brands 2013 conference where she participated with a number of women business leaders on a panel addressing business gender equality. Her voice on this subject is authoriative and compelling on the specific barriers to placing women on the board of directors.
Bill Roth is an economist and the Founder of Earth 2017. He coaches business owners and leaders on proven best practices in pricing, marketing and operations that make money and create a positive difference. His book, The Secret Green Sauce, profiles business case studies of pioneering best practices that are proven to win customers and grow product revenues. Follow him on Twitter: @earth2017