A Study of More than 600 Corporate Board Directors Finds That Female Decision Makers Do a Fairer Minded Job than Men — which, the Authors Conclude, Seems to Explain Previous Findings that Having a Higher Proportion of Women on Corporate Boards Results in More Profitable Company Performances

27 March 2013

Citation — to study

Chris Bart and Gregory McQueen, Why women make better directors, International Journal of Business Governance and Ethics 8 (1): 93 – 99, DOI: 10.1504/IJBGE.2013.052743 (2013)

Citation — to press release

Julia Thomson, Women make better decisions than men, McMaster University – DeGroote School of Business (25 March 2013)

What we apparently already knew about women’s superiority in decision making

Julia Thomson’s McMaster University press release points out that:

Boards with high female representation experience a 53% higher return on equity, a 66% higher return on invested capital and a 42% higher return on sales (Joy et al., 2007).

Having just one female director on the board cuts the risk of bankruptcy by 20% (Wilson, 2009).

When women directors are appointed, boards adopt new governance practices earlier, such as director training, board evaluations, director succession planning structures (Singh and Vinnicombe, 2002).

Women make other board members more civilized and sensitive to other perspectives (Fondas and Sassalos, 2000) and reduce ‘game playing’ (Singh, 2008).

Female directors are more likely to ask questions rather than nodding through decisions (Konrad et al., 2008).

Julia Thomson, Women make better decisions than men, McMaster University – DeGroote School of Business (25 March 2013)

What the new study added

From the paper’s abstract:

The positive correlation between the presence of female directors on boards and corporate performance suggests that women appear to make better directors than men.

But why?

Using the Defined Issues Test (DIT) instrument (Rest, 1979, 1986), 624 board directors (75% male; 25% female) were surveyed to determine their reliance on three reasoning methods (i.e., ‘Personal Interest’, ‘Normative’ and ‘Complex Moral Reasoning’ or ‘CMR’) to make decisions.

The results showed that female directors achieved significantly higher scores than their male counterparts on the CMR dimension which essentially involves making consistently fair decisions when competing interests are at stake.

Since directors are compelled to make decisions in the best interest of their corporation while taking the viewpoints of multiple stakeholders into account, having a significant portion of female directors with highly developed CMR skills on board would appear to be an important resource for making these types of decisions and making them more effectively.

© 2013 Chris Bart and Gregory McQueen, Why women make better directors, International Journal of Business Governance and Ethics 8 (1): 93 – 99, DOI: 10.1504/IJBGE.2013.052743 (2013) (at Abstract) (paragraphs split)

Having read the male authors’ abstract — now read Julia Thomson’s even more understandable (female) translation of the paper’s content

She wrote:

A survey of more than 600 board directors showed that women are more likely to consider the rights of others and to take a cooperative approach to decision-making.

This approach translates into better performance for their companies.

Bart and [Gregory] McQueen found that male directors, who made up 75% of the survey sample, prefer to make decisions using rules, regulations and traditional ways of doing business or getting along.

Female directors, in contrast, are less constrained by these parameters and are more prepared to rock the boat than their male counterparts.

In addition, women corporate directors are significantly more inclined to make decisions by taking the interests of multiple stakeholders into account in order to arrive at a fair and moral decision.

They will also tend to use cooperation, collaboration and consensus-building more often – and more effectively – in order to make sound decisions.

Ms. Thomson’s writing proves the male authors’ point in a parallel and more effective way

She went right to the heart of what the study found, without obscuring it with the men’s slightly pompous and partially obscuring language.

For example, compare Ms. Thomson’s — “consider the rights of others” and her “interests of multiple stakeholders” — with the men’s — “viewpoints of multiple stakeholders” and “competing interests”:

A “viewpoint” is not a “right.”

“Stakeholders” is an obtusely abstract way of referring to “others.”

And “competing interests” appears to imply a winner take all approach that Thomson’s writing implicitly refutes by referring to the need to “arrive at a fair and moral decision.”

The male coauthors apparently ignored an even more telling gender distinction that is implicated in their own research:

Notice Ms. Thomson’s emphasis on “cooperation, collaboration and consensus-building.”

The men did not include that vital and multifaceted gender distinction in their abstract.

Did they miss part of their own point?

Why the study’s findings matter

According to the paper’s authors, women only make up only about 9 percent of board memberships, planet-wide.

Given that money is the corporate bottom line, anti-female gender discrimination is a mistake. Why discriminate against the very leaders who are more likely to lead companies to profit?

The moral? — There is nothing new in men (stupidly) shooting themselves in their feet

As coauthor Chris Bart put it:

“Our findings show that having women on the board is no longer just the right thing but also the smart thing to do.

“Companies with few female directors may actually be shortchanging their investors.”

PeteFree.com

A Study of More than 600 Corporate Board Directors Finds That Female Decision Makers Do a Fairer Minded Job than Men — which, the Authors Conclude, Seems to Explain Previous Findings that Having a Higher Proportion of Women on Corporate Boards Results in More Profitable Company Performances