by Sonia Falconieri | professor of finance at the Bayes Business School (formerly CAS) in London
Improving gender balance on corporate boards has been at the top of the European policy agenda for more than a decade. The gender balance regulatory initiatives that countries have taken to address this issue fall into two broad categories: voluntary (UK, Denmark, Finland, among others) and quota-based (France, Italy, and Belgium, among others).
Research aimed at demonstrating the cost of this imbalance on corporate boards has increased in recent years. Most of this research has focused on the impact of greater female presence on corporate performance. The causal link between gender diversity and corporate performance is very difficult to establish and the conclusions are not unanimous. However, current evidence suggests that more women do not harm corporate performance. More interestingly, extensive research has found substantial behavioral differences between male and female directors. Boards with greater female representation are less likely to be involved in malfeasance, are more sensitive to CSR/ESG issues, and are more innovative.
Much progress has been made since the first gender balance initiatives were introduced in 2011. In 2010, the average percentage of women on the boards of the EU's largest companies was 11.9 percent, an increase of only 3.6 percent since 2003. Between 2011 and 2016, when most EU countries adopted some gender balance initiatives, the ratio increased by 12.1 percent to 23.9 percent and now stands at 32.2 percent.
However, progress has not been uniform across Europe, and although quotas still raise some concerns, research shows that they have succeeded in increasing women's representation on Boards more quickly than voluntary regulations, without compromising their effectiveness. In this regard, I believe that the European directive Women on boards on women on boards, which was recently adopted, and which envisages achieving a 40 percent quota of women on the Boards of all EU listed companies by 2026, is an important step in ensuring that disparities between member states are finally ironed out.
Although progress has been made, there is still work to be done, especially to increase the presence of women in management positions. The data in this regard remain disappointing. A recent article in Forbes points out that 10 percent of Fortune 500 CEOs are now women, and although this is a small step forward, 90 percent of CEOs are still men. The situation is equally bleak, if not worse, in Europe, where only 8.2 percent of CEOs of major companies are women, an increase of just 5.7 percent since 2012. Similarly, only 8 percent of board chairmen are women. More needs to be done to support women in the promotion process and at the top of the corporate ladder.
Let us not forget that all existing gender balance initiatives cover publicly traded companies (except in France, where the 40 percent quota extends to all private companies with more than 500 employees). The situation of companies outside the scope of existing gender balance initiatives is much less transparent, but it is clear that progress is still very slow.
A few days ago, the FTSE Women Leaders Review 2023 published for the first time a survey of 50 of the UK's largest private companies (with a turnover of more than 1 billion and 4,000 or more employees). The data show that of these 50 companies, 19 (or 38 percent) still have a board of directors made up of only men or one woman. It is therefore imperative to monitor the progress made by large private companies to ensure gender balance and avoid regulatory arbitrage.
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