Here is an excerpt from an article written by Marcus Noland and Tyler Moranfor Harvard Business Review and the HBR Blog Network. To read the complete article, check out the wealth of free resources, obtain subscription information, and receive HBR email alerts, please click here.
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While successful female leaders have made headlines in recent years — Marissa Mayer, Sheryl Sandberg, and Indra Nooyi all come to mind — they remain the exception to the rule.
Yet in the U.S. women make up nearly 40% of MBA graduates and 40% of managers. In many countries they make up an equal or greater share of tertiary graduates and the professional and technical labor force. And worldwide they are catching up to men in levels of education and workforce participation. So why do women remain hard to find in the corporate boardroom and the C-suite?
In a new Peterson Institute for International Economics working paper, we present the results of our survey of nearly 22,000 firms globally. We found that in 2014 almost 60% of these firms had no female board members, just over half had no female C-suite executives, and fewer than 5% had a female CEO. But there was considerable variation among countries: Norway, Latvia, Slovenia, and Bulgaria had at least 20% female representation in board members and senior executives; only 2% of Japanese board members and 2.5% of Japanese C-suite executives were women. There was similar, though less dramatic, variation across sectors as well: financial services, health care, utilities, and telecommunications were relatively welcoming to female leadership, while fewer women were found at the top in basic materials, technology, energy, and industrial sectors.
We found that these figures matter to the bottom line. When we examined the profitable firms in our sample (average net margin of 6.4%), we found that going from having no women in corporate leadership (the CEO, the board, and other C-suite positions) to a 30% female share is associated with a one-percentage-point increase in net margin — which translates to a 15% increase in profitability for a typical firm.
However, it is not just a matter of getting women to the very top ranks of management. Our results indicate that the impact of having more women in the C-suite is bigger than that of having a woman on the board or as the CEO. In fact, we found that female CEOs neither systematically outperform nor underperform their male counterparts.
We believe that there are at least two channels through which more female senior leaders could contribute to superior firm performance: increased skill diversity within top management, which increases effectiveness in monitoring staff performance, and less gender discrimination throughout the management ranks, which helps to recruit, promote, and retain talent. Because gender-biased firms do not reward employees with responsibilities commensurate with their talent, they lose out to rivals that do not discriminate. Their lack of gender diversity affects the bottom line.
So how do we get more women into these upper ranks? The research underscores the need to encourage female advancement throughout the corporate structure, not just to the corner office. Our study found that women’s success in corporate advancement correlates with some basic building blocks: high math scores, high rates of concentration in degree programs associated with management, and liberal parental-leave policies (including paternal leave). Success is also correlated with the relative absence of discriminatory attitudes toward female executives.
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Here is a direct link to the complete article.
Marcus Noland is executive vice president and director of studies at the Peterson Institute for International Economics and a nonresident senior fellow at the East-West Center.
Tyler Moran is a research analyst at the Peterson Institute.