Generally, the involvement of women in corporate governance has been a critical talking point for years. Though there are more women directors and top-level executives than ever before, the feminine gender still feels underrepresented and, in some cases, discriminated against in the boardroom despite the majority of them being competent and qualified enough to take up corporate leadership roles.
Globally, women hold only 23.3% of board seats, and only 8.4% chair the board of directors. Moreover, only 6% serve as CEOs and 17.6% as CFOs. So clearly, gender disparity is still an issue and a huge stumbling block for effective corporate governance, and it’s about time that something is done to bridge this gap.
A 2022 report by the World Bank reveals that Europe has the highest representation of women board members, at 35%, while the Middle East has the lowest, at 10%. While the stats may have slightly changed between then and now, we don’t expect a significant change. The World Bank report also points out that publicly listed companies tend to have better female board representation (19.7%) than their private counterparts (7%).
With most board positions obtained through networking at the highest corporate levels where men dominate, it’s increasingly becoming difficult for women to get such appointments and for companies to enjoy gender parity in the boardroom. Of course, there are many other reasons, such as gender stereotypes, wage disparity, and work-life balance, which we shall look at in this review.
The goal of this article isn’t just to paint the actual picture of gender disparity in boardrooms but also to create awareness of the positive impact of gender diversity on corporate governance and how to embrace it amidst the existing challenges. Let’s get into it!
Key Takeaway:
- Globally, women hold only 23.3% of all board seats; 8.4% chair board meetings, 6% serve as CEOs, and 17.6% are privileged to operate as CFOs.
- European countries have the highest female board representation globally at 35%, while the Middle East has the lowest at 10%.
- In Africa, women hold 14% of board positions, meaning one of every seven board members is a woman.
- Kenya ranks first in Africa among countries with the highest female board representation at 19.8%, while Cote d’Ivoire ranks last at 5.1%.
- Gender diversity significantly impacts boardrooms, improving performance, decision-making, talent pool, customer insights, innovation, corporate image, investor relations, corporate governance, and profitability.
- Common reasons behind gender disparity in the boardroom include gender stereotypes, work-life balance, wage disparity, and leadership underrepresentation.
- Gender parity in the boardroom is attainable through support networks, active inclusion (of women), anti-discrimination policies, talent pool expansion, merit-based recruitment, strong ESG, and investor pressure.
Gender Diversity in Boardrooms Around the Globe
As of 2023, women held less than ¼ of seats on boards of directors around the globe, according to Deloitte Insights. To be specific, that’s only 23.3% of board seats. Note, however, that while the stat may claim gender disparity in the boardroom, it’s a 3.6% improvement from the prior year, mainly due to companies’ numerous efforts to promote diversity and inclusion.
If the curve continues to rise by at least the same margin every year from now on, companies around the globe are likely to attain gender parity in boardrooms by 2023, argues Deloitte. However, a lot has to be done to facilitate that, including the board of directors instituting the right policies to promote diversity and inclusion and oversee their implementation.
Interestingly, most countries demonstrating gender diversity and those close to obtaining parity have a mandatory quota for women’s board positions. For example, France, Italy, and Norway have a 40% quota for women board positions in publicly listed companies. In comparison, the Netherlands and Belgium have a 33% quota.
In the UK, the quota stands at 34-40%, depending on the company, while in Australia, it’s about 34%, which is a massive jump from the 15% recorded in 2014. Overall, more developed countries are embracing gender diversity, which is a good thing. However, the same cannot be said about developing countries.
Meanwhile, more women are chairing boards of directors and board committees around the globe. The Deloitte Insights report shows that more than 40%of committees, including audit, nomination, compensation, and risk committees, are chaired by women. European nations like the UK, Italy, Belgium, Norway, and Ireland are among those taking the lead.
Gender Diversity in Boardrooms Across Africa
A woman who climbs the corporate ladder in a male-dominated region like Africa always makes the front-page news, which is exciting. The only issue is that it doesn’t happen often, and the apparent reason is gender disparity.
According to a 2015 account by the African Development Bank entitled ‘Where Are the Women?’, women held only 14% of board positions in Africa then. That translates to one female director on a board with seven members. It also means that a third of boards in Africa don’t have women’s representation, which is quite a shame.
Fascinatingly, Kenya ranks first among African countries with the highest women representation in boardrooms, at 19.8%, while Ghana (17.7%) and South Africa (17.4%) take positions two and three, respectively. Botswana and Zambia complete the top five list, each with 16.9% board representation.
One company setting the standard in boardroom gender parity in the region is Kenya’s East Africa Breweries (EABL), where women occupy up to 45.5% of board positions. A decade ago, the stat stood at only 16%.
Coming in second and third are South African-based Impala Holdings Ltd (38.5%) and Woolworth Holdings Ltd (30.8%). On the other hand, the country with the smallest female board representation in Africa is Côte d’Ivoire (5.1%). Others include Morocco (5.9%) and Tunisia (7.9%).
The stats affirm that women aren’t just underrepresented in boardrooms in Africa but across all senior management and corporate leadership positions. Only a meager percentage gets to make it to the top.
But if there’s any consolation, the 14% women board representation in Africa isn’t the worst globally. It’s better than the 1% in the Middle East, 5.6% in Latin America, and 9.8%in Asia Pacific. Furthermore, more African women are joining blue-chip companies and top financial institutions, government enterprises, and NGOs as board members.
Impact of Women in Corporate Governance
Gender diversity has a massive impact in the boardroom, especially when promoting corporate governance. Here are ways boardrooms can benefit from women directors:
1. Improved Performance
According to a Harvard study, more female representation on the board of directors significantly improves a company’s general performance. Gender-diverse companies outperform others in their day-to-day operations for several reasons.
For one, women communicate better, and due to their persuasion, diligence, strong commitment to the board’s objectives, and ability to provide feminine insights, women board members can contribute immensely to the company’s performance.
Moreover, with women on the board, there are reduced incidences of unethical practices and conflicts of interest, and the company tends to enjoy a stronger strategic direction. Collectively, that boosts the company’s performance.
2. Improved Decision-Making
Experts argue that women are more persuasive, team players, and better communicators. Their presence on the board leads to more cohesiveness when deliberating on critical decisions. They are also more diligent when solving problems, often leading to better decision-making.
3. Improved Talent Pool
By adding women to the board, a company boosts its talent pool. Simply put, there are more talented personnel to consider when the board wants to develop a solution or action plan. Remember, it’s not about the numbers added to the board but the diversity of the feminine voice, which widens the talent pool by bringing varied viewpoints and experiences.
4. Improved Customer Insights
Gender diversity on the board leads to better customer experience by accommodating the female voice. Women directors can represent the interests of female customers, who are often the majority of customers.
Female board members can share the concerns and expectations of female consumers, and the company can consider them. Doing so means retaining the largest group of consumers, which every company wants.
5. Improved Innovation
Gender diversity leads to more diverse perspectives, which are integral to smart thinking and innovation, argues Deloitte. With innovation, a company can develop better and newer products or services and align its business strategy, leadership structure, and systems. In this case, the board is diversified and enjoys a stronger feminine presence, which gives it an edge in innovating.
6. Improved Corporate Image
According to reports, there are 40% fewer cases of financial reinstatements when a woman is on the board of directors. Furthermore, fewer governance-linked controversies like fraud, bribery, and corruption significantly improve a company’s corporate image. Overall, stakeholders tend to trust a company whose board is gender diverse. It paints a good picture of the company.
7. Improved Investor Relations
Investors highly demand gender diversity and inclusion, and once a company obliges and institutes supporting policies, the relationship between the two improves considerably. Ultimately, the investor gets to trust the board more and supports them financially when it comes to major corporate executions.
8. Improved Governance
Having more women on the board of directors is a recipe for better corporate governance. Since corporate governance is a mechanism by which a company is run, it ensures it looks after the interests of stakeholders, which women are already good at (taking care of others).
Women have a strong voice that favors them when contributing to board meetings. They become just as accountable for the company’s performance as their male counterparts, and the responsibility of accountability makes them want to do more to bolster corporate governance and stay in good books with shareholders.
9. Improved Profitability
Generally, gender-diverse boards have a 21% higher chance of attaining above-average profitability. Gender diversity improves a company’s earning quality as the company takes a more conservative approach, strives to observe ethical practices, and minimizes financial restatements. Ultimately, the female voice helps boost the company’s portability.
Why is there Gender Disparity in Boardrooms?
Gender inequality or disparity in boardrooms may be attributed to different reasons, which may differ between countries and companies. Here are, however, the most typical explanations for the lack of gender parity in corporate governance:
1. Gender Stereotypes
Unfortunately, a generalized preconception exists about men possessing specific characteristics and attributes that make them better suited to top corporate leadership positions than women. Women are often undermined or overlooked for these board positions based on beliefs like they are less aggressive, perhaps too emotional, or, as harsh as it may sound, not intelligent enough.
Ultimately, such gender stereotypes prevent capable women from sitting in the boardroom and making meaningful contributions. These beliefs are baseless and discriminatory against the feminine gender and need to stop!
2. Work-Life-Balance
Women traditionally perform a lot of invisible labor at home, including caregiving and house chores. For some, these chores are overwhelming, making it harder for them to keep up with the demands of the corporate world. Such women cannot break the corporate glass ceiling, making it harder for them to climb the ranks and eventually sit in the boardroom.
3. Wage Disparity
Studies show that most women earn up to 80% of what men in similar capacities and job positions earn. Why? That’s because they are women!
Another report shows that for every $1 a man makes, a woman in the same job capacity receives only 49 cents, which is quite concerning for the feminine gender.
Part of the reason women are underpaid is gender stereotypes, which I explained earlier. The problem with the disparity, however, is that women become less motivated to pursue top corporate positions, and that’s partly why few of them sit on the board of directors.
4. Leadership Underrepresentation
Board of directors’ members are often selected from individuals with top-level management experience. The problem with this is that few women climb the leadership ranks; thus, only a handful qualify for board positions. Their underrepresentation at the management level becomes their undoing at the board level.
How to Attain Gender Parity in Boardrooms Amidst the Existing Challenges
Though there are challenges in observing gender parity in the boardroom, companies can still make meaningful strides in bridging the disparity gap. Here are practical ways to go about it:
1. Support Networks
Support networks make women leaders feel wanted and qualified to hold board positions. This may be through training and mentorship programs focusing on creating strong female corporate leaders. It can also be through women-focused community networks where women corporate leaders can network, build each other up, and incite each other to pursue board positions.
2. Active Inclusion
Companies can also embrace gender parity by including women in corporate events where they can take key roles, such as being key speakers. It would also help if women were nominated to critical projects and committees where they could showcase their corporate leadership prowess.
Furthermore, companies should start involving women at the management level, where they can grow confidently and aspire to higher positions, including being part of the board.
3. Anti-Discrimination Policies
It’s time companies adopt strict anti-discrimination policies, especially regarding gender diversity and inclusion. The more stringent the policies, the more serious the staff and board will take them, and the easier it will be for women to feel protected against prejudice.
The policies should include a minimum threshold for women board members. Most companies have a 30-40% threshold, which is a good target for any company serious about attaining gender parity. That has been the case with most European countries, such as Italy, Norway, and France, which have recently set the gender parity benchmark.
4. Talent Pool Expansion
Expanding the board’s search for potential candidates can help a company achieve gender parity in the boardroom. In this case, the board recruitment team must move beyond traditional channels and networks and consider candidates from diverse backgrounds and genders.
Opportunities like corporate events, seminars, and conferences are perfect openings to find gender-diverse but competent candidates for the board of directors.
5. Merit-Based Recruitment
Companies should try to overcome board gender bias. One way to do that is to focus recruitment on track records and achievements rather than gender. They should put all candidates on an equal playing field and judge them on merit. In doing so, women will have the same opportunity as men to join the board, and in the end, there will be gender parity.
6. Strong ESG
Generally, investors advocate for ESG (environmental, social, and governance), a key metric for gender diversity. It pushes the company to embrace fair female representation at all levels, including the board. According to an International Finance Corporation report, there’s a massive correlation between high ESG standards and women’s leadership.
Women are vital promoters of ESG, and the stronger the ESG practices are, the better the corporate governance will be. Even better, more women are likely to be driven to join the corporate world and aspire to board positions at a company notable for its strong ESG culture.
7. Investor Pressure
Investors can help promote gender parity in boardrooms by pressuring the board to embrace it and institute its policies. Since the board wants to impress the investors, and the investors want to get a good return on their investments by being associated with an inclusive and diverse brand, the two must come to a consensus and observe gender diversity.
Wrapping Up!
There’s no doubt about the impact of women in corporate governance. Companies stand to gain more with more women taking up board positions and making meaningful contributions in the boardroom.
Yes, the gender disparity gap is still huge, and companies have a long way to go to bridge it. But still, some have made considerable strides. Those who haven’t are advised to do so, and that’s where the Center for Corporate Governance comes in.
Through our monthly corporate governance training, we help client companies embrace gender diversity and inclusion in the boardroom and unlock their leadership excellence. From board members and top executives to business owners and entrepreneurs, everyone can benefit from our corporate governance training. Visit our website for more details!