Benefits of Women to Business and the Economy Are Clear, but Distant
Research overwhelmingly suggests that having more women in the C-suite improves profitability. More women in the workforce would kick-start the economy.
However, despite all the economic benefits more working women would bring, they remain very poorly represented in the workforce, let alone at the top levels of companies. It’s a situation that’s unlikely to change anytime soon, and Canada is a notable laggard in gender equality.
A joint study released last month by LeanIn.Org and McKinsey & Company showed that while American companies are committed to gender diversity, it’s mostly talk. Action is lacking.
“Companies’ commitment to gender diversity is at an all-time high, but they are struggling to put their commitment into practice, and many employees are not on board,” according to the “Women in the Workplace 2016” study.
There is no shortage of organizations and foundations working to improve the standing of women in the workplace. LeanIn.Org is one and Catalyst is another specializing in research about gender and inclusive leadership.
The 30% Club has the goal of achieving a minimum of 30 percent women on corporate boards. It receives broad sponsorship from a who’s who of the business world.
Canada’s gender wage gap is well above the average for Organisation for Economic Co-operation and Development (OECD) countries, and women make up just one in four senior managers in the country, according to a blog post penned by International Monetary Fund Managing Director Christine Lagarde.
Also, according to a Petersen Institute study of 22,000 firms in 91 countries, Canada ranked as one of the 10 least gender-balanced countries, with only 7 percent of board members being female.
In the Canadian federal public service, the gender wage gap stood at 9.5 percent in 2014–2015.
“We are nowhere in Canada in terms of making progress on gender diversity in our boardrooms,” said Jennifer Reynolds, president of advocacy group Women in Capital Markets, in an interview with BNN on Oct. 3.
Lagarde tweeted on Sept. 21, “My message to business leaders: including women in Boards of Directors improves the bottom line.”
The fact that companies scoring higher in gender diversity are more profitable has not been lost on institutional investors.
U.S. investment bank Morgan Stanley research shows that companies with high gender diversity scores have outperformed lower-scoring ones by 1.5 percent annually since 2011, with the added bonus of lower stock volatility.
Accordingly, Morgan Stanley assesses some 1,600 developed market companies for pay equality, presence of women in C-suite positions and key board committees, overall representation of women, diversity policies, and work/life balance programs.
Revitalizing the Labor Force
Globally, growth in the working-age population will fall from about 1 percent to 0.6 percent over the next two decades, said Bank of Canada Senior Deputy Governor Carolyn Wilkins in a speech in London, England, on Sept. 14. Female labor force participation has hovered around 50 percent over the past two decades, while it was 77 percent for men in 2014, according to the IMF.
Economists and central bankers have been struggling with the aging population and the toll it’s taking on developed world economies.
The upshot is that more women working can diminish the negative effect of a shrinking workforce on economic growth. This is quite compelling when the Bank of Canada estimates the Canadian economy’s growth potential at around a meagre 1.5 percent for the coming years. The picture is not much better in the U.S., with Federal Reserve projections of growth falling to 1.8 percent in the longer run.
Lagarde said a forthcoming IMF study suggests that if the current gap of 7 percentage points between male and female labor force participation was eliminated, the level of Canadian economic output could be about 4.5 percent higher today.
“If there are policies that would boost potential output—the sum of labor force growth and productivity growth— then we need to pursue them,” said Bank of Canada Governor Stephen Poloz in a speech in Quebec City on Sept. 20.
What Women Bring
Tapping into diversity of thinking—with the primary diversifier being women in a male-dominated world—appears to be the primary benefit to management.
Investment clubs, which are like micro-companies of say 10 to 15 people who decide which stocks to invest in, provide some insight into why diversity works.
In her study of 1,245 investment clubs, economic sociologist and Copenhagen Business School professor Brooke Harrington found that clubs made up of men and women earned 2 percent higher returns than either all-male or all-female clubs.
“Gender diversity in investment clubs means larger information pools from which to make decisions, which leads to enhanced performance,” writes Harrington in the book “Pop Finance.” Men and women have different sources of information and use it differently, she explains.
The book discusses how men and women have very different ways of investing and decision-making, and a synergistic diversity of views helps greatly with the challenge of investing in the stock market.
From her more than 25 years of experience, Charlene Ripley, Executive Vice Present and General Counsel at Goldcorp understands the value of the diversity of opinion in complex decision-making. “Anytime there’s a diversity of thought as part of decision-making in business, you get more robust decision-making from taking multiple perspectives into account,” Ripley said in an email to Epoch Times.
Investing requires synthesizing a large amount of information—something of a simplification to the decisions a corporate board makes. The greater the amount of information brought to the table, the better the decisions.
“They say the more complex the environment, the more you need diversity,” Harrington told Epoch Times. “I would want to rely as much as possible on diversity of opinion.”
In product development, companies need to better understand women as consumers since they drive the bulk of purchase decisions. And female directors are likely to be more in tune with women’s needs than men.
Not surprisingly, the challenge is the male attitude. As of 2015, women made up just 20 percent of S&P 500 company boards, and PwC’s Annual Corporate Directors Survey found that just 24 percent of male directors believe “very much” that diversity leads to better company performance. This is in contrast with 89 percent of female directors.
Diversity has to be a strategic priority for companies.
Aside from a change in attitudes, high-quality and more affordable childcare, better parental leave policies, and even tax advantages can help get more women working.
Female representation at the top helps motivate women in middle management and down the line. Studies also show that it improves the performance of other managers. “We need greater focus and commitment to hiring women and targeting women in succession planning,” said Ripley.
Reynolds says companies need to set targets—not quotas—for female representation in senior management. “Less than 10 percent [of companies] have a target around what they’re trying to get to,” she said.
Canada’s resource sector is notoriously male-dominated, which drags the country’s gender equality down. For example, women make up 14 percent of the mining workforce, according to Women in Mining Canada. To fix this problem, companies need to have requirements to identify women candidates in succession planning for critical roles have training and development programs for women.
A change of attitude and process is needed. “It takes the will and a deliberate focus to draw from outside traditional networks when forming boards,” Ripley said. It’s simply a part of good governance to look for talent that represents different perspectives, she added.
“We need to take every decimal point of potential growth more seriously than we have in the past,” said Poloz. He was referring to trade policies and infrastructure investments. But more women revitalizing the labor force from top to bottom is also critical in revitalizing the economy via its businesses.
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