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3.22 Encouraging Gender Diversity in Corporations (Obj. 5)

Despite strides by some global companies toward greater diversity, a recent Alliance for Board Diversity (ABD) study reported that women and minorities are still underrepresented in U.S. corporate boardrooms. The alliance led by research firm Catalyst found that men held 82 percent of board seats at Fortune 100 companies (white men occupied 70 percent). Men’s share on boards in Fortune 500 companies was higher at 85 percent (white men held nearly 75 percent).116 ABD called a 1.1 percentage point gain for women over six years since its last census “not appreciable.”117 Also, white men held as many as 95.5 percent of board chair positions, the top jobs in the Fortune 500. Ilene Lang, chair of ABD and CEO of Catalyst, suggested that greater diversity benefits corporations: “More diverse boards, on average, are linked with better financial performance.”118 The most recent Women Matter report published by consulting firm McKinsey & Company concurs and confirms its own earlier findings: “[T]he link between the presence of women in executive committees and better financial performance is still valid.”119

A Ceram Business School study in France found that across all industries, corporations with the highest proportion of female managers saw their share prices fall the least at the height of the Great Recession. “Feminisation of management seems to protect against financial crisis,” the study’s author, Michael Ferrary, concluded. Ferrary credits female managers’ aversion to risk and long-term perspective for balancing the more risk-taking behavior of their male colleagues. He says that in uncertain times financial markets favor stable and risk-averse companies.120 He calls for greater gender diversity because it fosters a more diverse culture and leads to the exploration of more varied business opportunities. He believes that reducing gender inequality is not only socially responsible but also profitable for a company.121 According to a Financial Times editorial, lack of gender diversity “now sends negative signals of a conservative mind-set, an inability to look beyond a tried circle of directors and a proneness to damaging group-think.”122

How can greater gender diversity be accomplished? European countries such as Germany, the UK, France, Italy, and the Netherlands are taking radical measures. They are threatening to impose mandatory quotas within the next five years unless public companies increase the percentage of women on their corporate boards to as much as 40 percent. Critics counter that rigid quotas could jeopardize the very goal of greater diversity, unduly affect smaller companies, and encourage the appointment of token women just to satisfy the requirement. Rather, they suggest that politicians and business leaders pursue voluntary targets and appeal to investors to step up the pressure on companies to change.123

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