Introduction

The number of women on boards is not shifting according to Catalyst whose census indicates that 19.9% of board seats were held by women last year, compared with 19.2% the year prior. Meanwhile, a new research paper by Adams suggests the number is smaller than we think. In her paper, she questions the evidence that corporations with female directors on their boards perform better, citing what we know from studies by Catalyst, McKinsey and others.

Summary

Because these studies are not held to the same rigorous research standards expected in academic settings, causal effects can and do affect results and conclusions. In particular, Adams highlights the problem of “endogeneity” where omitted variables, reverse causality and measurement error impact the results and conclusions drawn. She flags the need for better definition of “under-representation”; how to measure board diversity (E.g., should women be counted multiple times when they serve on more than one board?) and the business case for diversity (I.e., if male and females do not differ in skills, experiences and preferences, the case for diversity cannot be made).

While experiments are difficult to conduct, Adams advocates for tools and techniques that can bring more rigor to avoid correlations that imply causation in order to develop informed policy.

Findings

• Measurement Errors:
  • Adams replicates the Catalyst study that finds changes in boardroom diversity results in large increases in Return on Equity (ROE). Using a sample of Riskmetrics board data on unregulated S&P 1500 firms for the period 1996-2003, she controlled for firm size and other variables and concluded that once “omitted variables” are factored in, the correlation is no longer significant.
  • By adding firm fixed effects, Adams suggests that firms with better corporate culture and workplace practices perform better and also have more female directors. After stripping out the culture effect, the relationship between diversity and performance is negative and still suffers from reverse causality problems.

• Measuring Representation: Using several more current data sets, Adams plots female board representation by country and notes that board representation is generally trending upwards, albeit at different rates across different countries. USA, Norway, France and Spain emerge with the highest level of diversity with Norway leading the pack by a long margin (resulting from gender quota policies). Adams research reveals that that while we have better data to assess female representation, data sets and measurement techniques can vary widely, leading her to conclude that women are much less represented than we think they are. For instance, she demonstrates how director participation can be affected if women who serve on multiple boards are counted multiple times.

• Gender Preferences Impact: In a review of more recent literature, Adams cites several research studies that examine corporate outcomes relative to CEO or board gender diversity. They reveal that women demonstrate lower levels of confidence, greater risk-aversion and greater “other-regarding’ preferences which translate to lower deal initiation, less overconfidence and less likelihood of overpaying among more diverse boards. In a Nordic control group, the female directors greater preferences for ‘other-regarding’ translated into fewer employee layoffs. While gender differences exist in the boardroom, they are not the same as those found in the general population.

Conclusion

Adams concludes that better data and empirical techniques are necessary to understand how the selection of women and the contribution they make affects firm outcomes. She recommends more research on:

• The reasons why women are less represented on the boards of smaller firms
• How the presence of women affects decision-making and corporate outcomes
• How the number of women on a board affects results
• The causes of under-representation of women on boards

“While they [women] may not (always) be superheros, there is little doubt that they will influence firm and societal outcomes. To characterize this influence we need a better understanding of what women bring to the boardroom table and how diversity affects firm outcomes.”

Full Article Link

Recommended Resources

• 2020 Women On Boards is a non profit whose mission is to increase the percentage of women on U.S. company boards to 20% or greater by the year 2020. The cornerstone of its campaign is the 2020 Gender Diversity Directory, a database of public and private companies with the gender composition of their boards. A subset of this Directory is the 2020 Gender Diversity Index (GDI) which is based on the 2010 Fortune 1000 list of companies. 2020 WOB tracks this group of companies from year to year, measuring the percentage of board seats held by women. Utilizing the same list from year to year allows us to more accurately measure progress. You can browse the list or search the index.

• Feintzeig, Rachel. “Another Study Shows Little Progress Getting Women on Boards.”  Wall Street Journal, 14 June 2016. Web.

• Women on Boards (WOB) exists to help women in Australia and the U.K. to make the right connections and career choices to get to the top within their own company or to take on a board or committee role as a non executive director (NED), trustee or governor. Membership offers support and mentoring, as well as access to openings for women interested in serving on boards.

• Global Board Ready Women LinkedIn Group is a global initiative of leading business schools & professional organisations from around the world. The group provides executive search firms & those making board appointments with a list of suitable board-qualified women for companies in Europe & the world. Women who are interested in joining should review the Group’s membership criteria.

Summary

While 50% of supervisory and management positions are held by women, female representation drops to less than 5% when it comes to the c-suite. In this paper. the researchers argue that while women self-rate similarly to men on multi-source feedback (i.e. through their own and others feedback ratings), they under-estimate how they are seen by others. Through a series of studies, the researchers set out to assess whether women are less aware of their leadership capabilities than their male counterparts and whether they are failing to appreciate their talents and leadership impact. They found evidence that women under-predicted their leadership competencies relative to men. The discrepancy was particularly pronounced when women leaders were asked to predict their bosses’ ratings on emotional and social competencies and transformational leadership.

The authors recommend areas for future research as well as steps for organizations and their female leaders to take.

Findings

• In their initial study of 240 leaders, assessments of emotional and social competencies of 1700 bosses, direct reports and peers revealed that under-prediction exists among women, but not men. This discrepancy was greatest when women were asked to assess their bosses’ ratings.

• In a follow up study, using a new sample of 200 leaders and their bosses, women leaders did not self-rate differently from the men. However, they significantly under-predicted their bosses ratings on transformational leadership compared to men. The difference cannot be attributed to self-confidence or differences in their bosses’ feedback.

• In a follow up to the second study, 76 women leaders were asked about their prediction of their bosses ratings and the potential impact of under-prediction. Women proposed only negative consequences, while failing to offer explanations that the data supported (E.g. lack of self-confidence and feedback frequency).

Practical Implications

The findings raise the question as to whether under-prediction impairs a woman’s leadership performance. The authors note this will be the focus of future research. Under-prediction can negatively impact women and their organizations when qualified women are overlooked for promotion and/or do not speak up. Can this impact self-confidence and performance?

“…our interest and contribution here is to invite organizations to better understand what constitutes leader self-awareness and work to improve this important leader capability for all leaders.”

Conclusion

The authors propose ideas on how organizations and women leaders can foster heightened and more accurate self-awareness, including:

• Assessing self-awareness in leadership development/education programs
• Broadening multi-source feedback assessments to include the leader’s predictions of ratings from others
• Improved quantity and quality of feedback to women leaders, with specifics that enable women to believe rather than discount perceptions

In concluding, the researchers encourage organizations to replicate the study, create forums for discussion among women leaders and take steps to improve prediction accuracy.

Study Methodology

1. In the first study, 240 leaders (with 15 years’ average experience) were assessed. Information from over 1700 others (including bosses, direct reports, and peers) was collected on these leaders. The leadership behaviors that were measured were emotional and social competencies.
2. In the second study, data was collected on transformational leadership capability (i.e., intellectual stimulation, idealized influence, individualized consideration) using from a new sample of approximately 200 leaders and their respective bosses online survey techniques.
3. In a follow up to the second study, the researchers used a qualitative approach to further understand women leaders thinking around self-awareness. They questioned 76 women leaders (from supervisors to senior executives) about predicting boss ratings.

Full Article Link

Recommended Reading

• Schwartz, Tony. “Overcoming the Confidence Gap for Women.” The New York Times. The New York Times, 12 June 2015. Web.
• Sturm, Rachel E., Scott N. Taylor, Leanne E. Atwater, and Phillip W. Braddy. “Leader Self-awareness: An Examination and Implications of Women’s Under-prediction.” Journal of Organizational Behavior, 35(5)
• Warrell 20, Margie. “For Women To Rise We Must Close ‘The Confidence Gap’” Forbes. Forbes Magazine, 20 Jan. 2016. Web.