What effect does having women in executive roles have on the bottom line?
A survey of 21,980 publicly traded companies in 91 countries demonstrated that the presence of more female leaders in top positions of corporate management correlates with increased profitability of these companies, according to a paper published by the Peterson Institute for International Economics. The 35-page report, “Is Gender Diversity Profitable? Evidence from a Global Survey,” was written by Marcus Noland, Tyler Moran, and Barbara Kotschwar and supported by a major research grant from EY. The research is made up of rigorous data analysis of gender diversity and corporate profitability.
The study shows that the extent of gender diversity and its relationship to profitability varies robustly by country, sector of the economy, and by policies towards female work opportunities. The research finds no evidence that, by itself, having a female CEO is related to increased profitability, but there is some evidence that having women on a board may help—and robust evidence that women in the C-level (as in CEO, CFO and COO of management) is associated with higher profitability. In 2014 data, the study finds that nearly a third of companies globally have no women in either board or C-suite positions, 60 percent have no female board members, 50 percent have no female top executives, and fewer than 5 percent have a female CEO.
The PIIE report also found strong positive correlations between gender diversity in company size, the size of the company as well as national policies for women’s education, family leave, and the absence of discriminatory attitudes toward female executives. The study found that national averages for women’s participation on boards range across countries from 4 percent to roughly 40 percent, and that there is greater female representation on board and corporate leadership positions in the financial, healthcare, utility, and telecommunications sectors than in sectors such as basic materials, technology, energy, and industry. This is consistent with the authors’ interpretation that what matters most for gender diversity is creating a pipeline of women into corporate management, from elementary education through child-bearing years.
“We have found that some policy initiatives are more promising than others to deliver benefits while promoting gender equality, and that the emphasis should be on increasing diversity in corporate management broadly,” said Adam S. Posen, president of the Peterson Institute for International Economics. “At a minimum, the results from our unique global study, generously supported by EY, strongly suggest the positive impact of gender diversity on firm performance and identify in which sectors and countries the most progress on diversity needs to be made.”
“The impact of having more women in senior leadership on net margin, when a third of companies studies do not, begs the question of what the global economic impact would be if more women rose in the ranks,” said Stephen R. Howe, Jr., EY’s US chairman and Americas managing partner. “The research demonstrates that while increasing the number of women directors and CEOs is important, growing the percentage of female leaders in the C-suite would likely benefit the bottom line even more.”
The Peterson Institute for International Economics is a private nonpartisan, nonprofit institution for rigorous, intellectually open, and in-depth study and discussion of international economic policy. Its purpose is to identify and analyze important issues to make globalization beneficial and sustainable for the people of the United States and the world, and then to develop and communicate practical new approaches for dealing with them. Learn more at piie.com.