Diversity on boards is critical to sustaining performance.
Broadening the composition of the board increases the size of the candidate pool and, more importantly, helps expand perspectives at the top. While most CEOs recognize the importance of appointing directors of different ages and with different kinds of educational backgrounds and functional expertise, they tend to underestimate the benefits of gender diversity.
In recent years, governments and organizations worldwide have implemented policies to increase gender diversity on boards. For instance, the Italian government passed a law requiring listed and state-owned companies to ensure that by 2015, one-third of their board members would be women. This move was part of a broader trend across the European Union and other regions to improve gender representation at the highest levels of corporate governance.
There are several benefits to appointing more women on boards. Studies have shown that companies with higher numbers of women directors perform better financially. When Fortune-500 companies were ranked by the number of women directors on their boards, those in the highest quartile reported significantly higher returns on sales and equity than the rest.
Experts believe that companies with women directors deal more effectively with risk. Not only do they better address the concerns of customers, employees, shareholders, and the local community, but also, they tend to focus on long-term priorities. Women directors are likely to be more in tune with women’s needs than men, which helps develop successful products and services. After all, women drive 70% of purchase decisions by consumers in the European Union and 80% of them in the United States.
Research by Catalyst, a not-for-profit that seeks to expand opportunities for women, shows a strong link between the presence of women on boards and corporate reputations. Female directors serve as role models, improving female employees’ performance and boosting companies’ images. Several rating agencies and investment funds use the extent of gender diversity as one of their investment criteria.
However, despite some progress, gender representation on boards remains uneven. Research shows that the percentage of women in FTSE 100 companies has risen slowly over the past decade. Geography plays a role in these disparities, with Scandinavian nations leading in gender diversity on boards, while countries in Southern Europe lag behind.
In Turkey, participation rates of women in the workforce are among the lowest in Europe, indicating major barriers to entry into the workforce. Despite these challenges, Turkey has made notable strides in gender representation on boards. The country has a high percentage of female CEOs and board members, partly due to the influence of prominent business families and initiatives aimed at promoting women leaders.
Studies show that the presence of at least three women is necessary to change boardroom dynamics. An analysis of FTSE-listed boards found that operational performance and share prices were higher in companies where women made up over 20% of board members compared to those with lower female representation.
A new Turkish initiative seeks to increase the number of women directors by getting 40 businesspeople to coach 40 next-generation women leaders in the skills of board membership. This initiative is an example that other countries may well wish to follow, especially since the European Commission has been pushing for quotas for women directors in every member country.
Incorporating Business Growth Advisory
Increasing diversity on boards is not just a social imperative but also a crucial component of Business Growth Advisory. A diverse board can offer broader perspectives and innovative strategies, directly influencing a company’s growth trajectory. By integrating gender diversity into board composition, companies can leverage varied insights to foster sustainable business growth and enhance their market position.
Emphasizing Learning and Development Services
To achieve and sustain board diversity, companies should invest in Learning and Development Services. These services can help potential women leaders develop the necessary skills for board membership. Programs focusing on leadership, strategic thinking, and governance are vital for preparing women for these roles, ensuring they can contribute effectively from day one.
Enhancing HR Support Solutions
HR Support Solutions play a pivotal role in fostering an inclusive culture that values diversity. By implementing policies that encourage gender diversity at all levels, HR can help build a pipeline of female leaders ready for board positions. Support solutions should include mentorship programs, flexible working arrangements, and initiatives that promote work-life balance.
Streamlining Recruiting & Hiring Services
Effective Recruiting & Hiring Services are essential for identifying and attracting qualified female candidates for board positions. These services should include targeted recruitment efforts, unbiased selection processes, and partnerships with organizations that support women in leadership. By focusing on inclusive hiring practices, companies can ensure a steady influx of diverse talent.
Source: by Yilmaz Arguden June 7, 2012, Yilmaz Arguden is the CEO of ARGE Consulting; chairman of Rothschild Investment Bank in Turkiye; and an adjunct professor of strategy at the Bosphorus and Koç Universities in Istanbul.
