I doubt that having women per se in a business confers any advantage over and above having bright and diligent men and women chosen on the basis of their abilities. How would one test this this? Observational studies would be a start, looking to see whether the proportions of the sexes in different businesses, and at difference status levels in different businesses were related to profitability. The other approach is experimental, in which the proportions of the sexes in groups are systematically varied while the groups are tested on business-relevant tasks.
Credit Suisse (2012, 2014) has done an observational study of 3000 businesses, and find that better financial performance is associated with the proportion of women on Boards and top management teams.
They admit this cannot be considered causal, but of course it might be. Correlation is the way to bet. However, a non-causal association might be that successful companies are able to spend money on public relations, of which appointing a few women to top posts would be part, a cynical measure like giving to selected charities or implementing policies to encourage the recycling of company reports. This criticism could be countered by a longitudinal study at the company level, rather than the cross-sectional approach the authors follow. A longitudinal approach would allow a company to be measured against another company, and against itself at an earlier time, to see whether the number of women leaders made any difference.
Absent a longitudinal study, do the findings of the cross-sectional study allow us to estimate causal effects? Here are some pointers. First, it is the largest companies who have appointed women to top positions. If women were really important for business success, surely this would show from the very beginning, when companies were being formed? Small companies should show the effect most strongly. The large company effect suggests that the cynical interpretation of window dressing might be true.
Second, if women are important for business success, surely this would be evident in the businesses which were innovating, and overturning old established concerns. Women would be providing a fresh approach to management, against which traditional male dominated businesses would flounder.
Third, one needs a measure of survivor bias. Are there any sex differences in the proportion of women in companies which fail? Is there a bias towards companies started by ruthless men who much later employ some top women as window dressing? Conversely, do women start companies which are mostly small and remain small, thus falling below the levels required of Credit Suisse, even though they are profitable?
Credit Suisse say of their company data:
We have created a proprietary database from Credit Suisse’s global company research coverage, amounting to more than 3,000 companies across 40 countries and all major sectors—“The Credit Suisse Gender 3000 (CSG 3000)”. It tracks, by company, industry and region, the gender mix across the key senior management roles of CEO, CFO, Operations and Shared Services.
Greater diversity in boards and management are empirically associated with higher returns on equity, higher price/book valuations and superior stock price performance. However, new findings emerge from this added management analysis – we find no evidence that female led companies reflect greater financial conservatism where leverage is concerned. Also, dividend payout ratios have been shown to be higher. Female CEOs have proven to be less acquisitive than men when assuming the leadership position. The analysis makes no claims to causality though the results are striking.
It is not a case of a greater ability of one gender versus the other but that a more diverse group makes for better decision making and corporate performance.
While our statistical findings suggest that diversity does coincide with better corporate financial performance and higher stock market valuations, we acknowledge that we are not able to answer the causality question and this is an important caveat to the observations below in the report. Do better companies hire more women, do women choose to work for more successful companies, or do women themselves help improve companies’ performance? The most likely answer is a combination of the three. But, we would argue from our analysis that women in management are more of an influence on corporate performance than simply women in the boardroom, if still lacking a sufficient timeline of management diversity data to make broader claims of definitive causality.
They quote with approval the work of Wooley et al. (2010 ) which Bates and Gupta (2017) have shown not to replicate. This is no crime, but it may have established expectations on the part of the authors.
A fascinating study led by Professor Anita Woolley at Carnegie Mellon’s Tepper School of Business shows that it is not the greatest ability that leads to the best answer or outcome. Within a group working together, the presence of a woman within the group is one of the key factors that influences the group’s collective “intelligence” or in other words the ability of the group to make successful decisions. Skill sets are different, one is not necessarily better than another, but enabling seems as important as being able. This was also a key message of our initial report.
There is also a positive correlation between market capitalization of a company and the level of gender diversity at both the board level and in top management. Small company management tends to be less diverse.
Comment: This may be a clue as to what is going on.
The report is written in the usual corporate back-to-front way, with explanatory congratulations at the beginning, all the results next, together with glossy pictures, and then a list of policy recommendations. Then there are lots more pictures and some tables and graphs. Much later, they tell you what methods they used.
As it stands, although this is a cross-sectional study, it shows that there is an association between women on Boards and management of companies on one hand, and good company performance on the other hand. I think that, instead of more analysis of the data as they are, they should correct for company size, and very probably for company age. A look at startups would also be instructive. In that way they might be able to counter the strong impression that profitable companies have added women to non-crucial positions late in the day, just to appear women-friendly. The sort of companies that employ their own boardroom chef, and have a corporate jet, and really, really believe in the virtues of women in high places!