Impact of Gender Diversity on Corporate Boards

The meta-analysis conducted by researchers revealed a strong correlation between the number of women on corporate boards and financial performance. The study synthesized data from over 140 research studies and sampled more than 90,000 companies across 30 countries. The results showed that firms with gender-balanced boards reported higher returns on equity (ROE), assets (ROA), and invested capital (ROIC). Additionally, the study found a positive relationship between strong female leadership and company performance. The findings of this meta-analysis support previous studies that have concluded that increasing women's representation on corporate boards can improve financial outcomes.

Running Head: GENDER DIVERSITY ON CORPORATE BOARD 1
Gender Diversity on Corporate Boards
Name of the student
Name of the institution

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Executive Summary
Gender diversity on Corporate Boards remains a popular topic in business publications
and academic studies with increasing awareness about gender role issues in the workplaces
throughout the world. However, most of the emphasis remains on resolving the issues related to
‘how’ rather than considering “why” issues. The researcher of this paper has noticed this gap in
the studies and seeks to analyze various motivations behind seeking to increase an increase in the
number of women on corporate board on a global basis. For this purpose, the researcher has
selected the case study research methodology to study the issue in an Australian context. As part
of this case study, the researcher has selected GWA Group Ltd., a leading ASX Board in the
country. The research finding indicates that an increase in the number of women leads to an
increase in financial performance of the company in most cases.

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Table of Contents
Introduction 1
Performance of Gender Diversity Corporate Boards 2
Conclusion …………………………………………………………………………………………….………………………………..……………..4
Recommendations…………………………………………………………………………………………………………………………………..5
References………………………………………………………………………………………………………………………………………………6

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1. Introduction
During 2016, Credit Suisse AG, a leading financial services provider released a report
entitled, “The CS Gender 3000: The Reward for Change”, on a worldwide basis. The main focus
of this report was to analyse the Credit Suisse Gender 3000, that covers more than, 27000 senior
managers in more than 3,000 companies globally. This report analyses the collected database to
determine whether the gender diversity at the top level can be connected to better performance
and studies those organizations that have more than 50% female representation in venture capital
companies, Micro-finance institutions and senior management (Catalyst, 2017). As per this
report, the company confirmed its findings that the companies that employ a large number of
women who function in the decision-making roles continue to generate a superior profits rate and
market returns.
As part of this report, the organization also documented the percentage of women or
gender diversity on the corporate board throughout the world including Australia and some of the
figures related to this issue are as follows. As per this report, the women continue to remain
under-represented, although boardroom diversity continues to increase at a fast rate, for example,
in 2015, women held 14.7% of the total corporate board seats. Although this figure increased to
54% ever since 2010 and 12.4% since the previous year, only 20.1% of the companies that were
researched in the study had three women on the board (Lee et al., 2015). Further, the women
held only 4% of the board chair positions regardless of business sector. Not only that as per
MSCI study, more than 73.5% of companies included in the study had at least one woman
director (Lee et al., 2015).
As per Credit Suisse, to reap the benefits of the diversity the board must have at least 3 or
more than 3 women as it changes the boardroom dynamics in a substantial manner yet only

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20.1% of boards have appointed more than 3 women. When these figures are compared with
Australian figures, the research findings indicate that up to 2016, the women hold 23.4% of
board seats and almost a quarter of ASX Board seats that is up from 8.3% in 2009
aicd.companydirectors.com.au, 2015) . However, 10% of the ASX company boards do not
have any woman. But, as per latest figures, during first six months of 2016, women comprised
40% of latest appointments in the company boards. This figure is on the rise when compared
with the figure in 2015, that is, 34% and 22% in 2013. One of the best examples this is GWA
Group limited where there are 8 Directors in the Company Board and there is only one woman
director.
2. Performance of Gender Diversity Corporate Boards
One topic that remains the part of the debate in this area is whether the company boards
that have a higher female representation perform well when compared with other company that
does not have much gender diversity and corporate board level. In 2014, Post and Byron
published a research article where they conducted a meta-analysis of more than 140 research
studies related to board gender diversity that synthesized sample of more than 90,000 companies
from more than 30 countries. In 2015, the other remarkable study on this topic was published by
a team of researchers that comprised of Pletzer, Nikolova, Kedzior, and Voelpel. The main focus
of this study was to complete a meta-analysis of 20 studies and tested the relationship between
the financial performance of the company such as (ROE) or return on equity, (ROA) or return on
assets, and diversity on company board.
As per these results, the researchers need to consider other factors rather than considering
only the representation of women on board and the financial performance of the firm. According
to Post & Byron (2014), the firms that have more women director report a slightly higher

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“accounting returns,” that includes return on assets among the others when compared with the
organizations that have few women directors. This statement is also confirmed by other research
studies such as Pletzer, Nikolova, Kedzior, and Voelpel, (2015) and Eagly, (2016). However, as
per report published by Credit Suisse, the figures confirm the benefits of gender-balanced boards
for example; the firm with most women directors had a higher ROS such as 16% when compared
with the companies that do not have women directors (Strøm, D’Espallier, & Mersland,
2014).
Not only that these companies also reported the higher level of ROIC or return on
invested capital that reaches up to 26%. According to statistics published by MSCI, the
companies that have strong women leadership is correlated with higher ROE when compared
with the companies that do not have strong woman leadership, that is, 10.1% vs. 7.4% (Lee et al.,
2015). Further, this difference can also be noticed in superior price-to-book ratio, that is, 1.76 vs.
1.56. In addition, the report also concluded that the companies that have fewer women on
company boards face more governance-related issues when compared with the companies with
strong female leadership (Lee et al., 2015). This is also confirmed by the study finding of the
research study published by Pathan, & Faff during 2013.
In her book, “Find Room for her”, Rebecca Shambaugh, the author offers different causes
of this improvement in performance such as the leadership performance and style of women who
are in leadership positions. She also strongly supports the inclusion of more women on corporate
boards. To validate her point, she offers some statistics such as women anywhere represent 80%
on the consumer decision and they also possess important leadership perceptions and styles such
as democratic and transformational that enhances profitability of the company. A research study
published during 2009 by a team of researchers, Terjesen, Sealy, & Singh supports and

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confirms her research finding on this topic. She also states that this is due to the fact that women
possess natural skill sets related to listening to other people, sharing constructive criticism,
avoiding autocratic leadership style and keeping an open mind related to any matter. Located in
Queensland GWA Group Limited remain the leading Australian supplier of building fixtures as
well as fittings to commercial and household premises. This company has 8 Directors on its
corporate board but only one woman director.
3. Conclusion
It is clear from above research that gender-balanced corporate board remains the best
choice for a company that would like to achieve success and maintain it in an increasingly
competitive market. However, when the normal figures in AXN companies, that is, 23.4% are
compared with the figures related to GWA Group Limited, the percentage is just 12%. It is a fact
that as per many studies, there is a close correlation between the financial performance of a firm
and the number of women on corporate board. Not only that there is a strong relationship
between the leadership styles favored by women and the profitability of the company.
4. Recommendations
It is a fact that presently, the company is showing an average performance that continues
to fluctuate between small ranges for last five years.
To better its financial performance, the researcher offers following recommendations –
1. The company needs to increase the number of woman directors from 1 to 3 or more
than three. This is due to the fact that 3 or more than 3 women change the company
dynamics.

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2. The firm needs to ensure that the appointed women directors are not appointed to
comply with rules and regulations, but would take an active interest in the company
matters.
3. The company also needs to incorporate the suggestions given by these directors into
their company strategy.

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References
aicd.companydirectors.com.au (2015). Women on ASX 200 Boards on the Rise.
Available at
http://aicd.companydirectors.com.au/advocacy/board-diversity/women-on-asx-
200-boards-on-the-rise
Catalyst. (2017). Women on Corporate Boards Globally. [online] Available at:
http://www.catalyst.org/knowledge/women-corporate-boards-globally#footnote3_clwctpn
[Accessed 8 Sep. 2017].
Eagly, A. H. (2016). When Passionate Advocates Meet Research on Diversity,
Does the Honest Broker Stand a Chance? Journal of Social Issues,72(1), 199-222.
doi:10.1111/josi.12163
Lee, L., Marshall, R., Rallis, D. and Moscardi, M. (2015). WOMEN ON BOARDS GLOBAL
TRENDS IN GENDER DIVERSITY ON CORPORATE BOARDS - Cite This For Me. [online]
Msci.com. Available at: https://www.msci.com/documents/10199/04b6f646-d638-4878-9c61-
4eb91748a82b [Accessed 8 Sep. 2017].
Pathan, S., & Faff, R. (2013). Does board structure in banks really affect their
performance? Journal of Banking & Finance,37 (5), 1573-1589.
doi:10.1016/j.jbankfin.2012.12.016
Pletzer, J. L., Nikolova, R., Kedzior, K. K., & Voelpel, S. C. (2015). Does Gender
Matter? Female Representation on Corporate Boards and Firm Financial

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Performance - A Meta-Analysis. Plos One,10(6).
doi:10.1371/journal.pone.0130005
Post, C., & Byron, K. (2014). Women on Boards and Firm Financial Performance:
A Meta-Analysis. Academy of Management Journal,58 (5), 1546-1571.
doi:10.5465/amj.2013.0319
Shambaugh, R. (2013, pp. 65). Make room for her. New York: McGraw-Hill Press.
Strøm, R., D’Espallier, B., & Mersland, R. (2014). Female leadership,
performance, and governance in microfinance institutions. Journal of Banking &
Finance,42, 60-75. doi:10.1016/j.jbankfin.2014.01.014
Terjesen, S., Sealy, R., & Singh, V. (2009). Women Directors on Corporate
Boards: A Review and Research Agenda. Corporate Governance: An
International Review,17 (3), 320-337. doi:10.1111/j.1467-8683.2009.00742.x