The Case for Women in Boardrooms: Going Beyond Quotas

Malala Yousafzai once said: “We can’t all succeed, when half of us are held back.” Speaking at her first historic speech at the United Nations in 2013, the then 16-year-old women’s and children’s right activist made a simple equation.

In the 21st century, it seems incredible that we are still discussing the case for gender diversity and working to convince businesses and governments of its importance. The case for more women in leadership roles is clear, but progress is achingly slow.

This is despite ample evidence that companies perform better when they have women on their boards. A 2016 OECD report, for example, showed that companies with gender-diverse executive committees achieved 47 percent higher return on equity and 55 percent higher gross income than companies with less diverse boards. A 2018 Harvard Business Review survey of 1,700 companies found a “statistically significant” relationship between diversity in leadership and increased innovation.

Our work with the private sector to promote gender diversity globally has shown that having more women on boards has a strong impact on corporate governance, decision-making, and business results. A recent IFC study in Egypt also showed that companies with women on their boards reported a higher return on equity and investment.

Despite the increased awareness, however, much work remains. In Eastern Europe, women held only 8.5 percent of board positions as of 2016, according to the International Labour Organization.

In 2018, Georgia introduced legislation mandating a 20 percent gender quota in supervisory boards for commercial banks. Which leads us to the big question: Are quotas enough?

Back in 2007, Norway became the first state to implement a quota for gender diversity on boards, requiring that at least 40 percent of board members of listed companies were women. Other European countries quickly followed suit. Despite skeptics who argue that quotas are mere window-dressing and don’t actually help create more women executives, the result in Norway has been positive. More than 40 percent of Norway’s corporate boards included women last year, up sharply from 6 percent in.

While the Norwegian experience shows that quotas can help eradicate some inequalities in the short term, deeper change in the gender landscape is only possible through a comprehensive program of support.

First, it’s crucial to ensure that women actually stay in the work force. While there’s a near equal divide between the numbers of male and female entry-level workers in many countries, as workers move into mid-career managerial posts, gender imbalances become more apparent, mainly because of the number of women who drop out to focus on family.

Implementing women- and family-friendly workplace policies such as flex-time arrangements and child-care benefits, and encouraging women to return to work, can help prevent that loss. IFC’s 2017 report, Tackling Childcare: The Business Case for Employer-Supported Childcare, demonstrated the rising recognition among policymakers and businesses of the benefits to addressing these issues.

The second challenge is to cultivate talent by investing in women’s professional development. Exposing more women managers to key operational responsibilities and preparing them for the boardroom is key. Women in Eastern Europe, for example, represent 25–40 percent of mid- to senior-level management. But a look beneath this statistic reveals clear stratification by gender and job function. Female managers typically supervise departments supporting core business functions, while male managers oversee key operational and financial units.

There are also other gender differences—most likely accumulated from years of conditioning—that should be addressed. Even the most accomplished and experienced women often benefit from training and coaching on how to assert themselves, how to tap into their strengths to build their personal leadership style, and how to communicate in high-powered, male-dominated settings. Corporations can help by modifying their training programs to account for these differences.

While quotas raise awareness and help prioritize gender diversity and eventually push the numbers up, they can only be qualitatively effective if they are implemented alongside other more widespread measures. Focus on fixing the leaking pipeline of female talent, promote more women into front-line roles, and invest in women’s professional development and we could finally see a more equitable corporate landscape in the years to come. That would be good news for everyone.

By Wiebke Schloemer, IFC Regional Director, Europe and Central Asia