Study Shows Women Directors Make Boards More Effective

Figures published last month show that for the first time, more than a third of board members in the UK's top 350 companies are women. However, 18 boards within the FTSE 250 remain 'one and done', where companies appoint a single woman board member and go no further.

• Women make up more than a third of all board members across the FTSE 350 for the first time

A new study led by our colleague Angelica Gonzalez, Senior Lecturer in Finance, shows that not only is it the right thing to do from an equality point of view, but appointing women makes boards more effective in their duties.

• Gender Diversity and the Spillover Effects of Women on Boards

Using data from over 80,000 directorships served between 1998 and 2012, Angelica and her colleagues found that boardroom gender diversity is closely linked to key qualities such as board attendance, CEO accountability, and risk-taking.

It seems there is a 'spillover' effect, whereby male directors who have experience of serving with female directors on one board are more likely to work positively with female directors on other boards they serve on.

Angelica gives some examples:

"For gender diversity to have an impact on, for example, monitoring, it is not sufficient that female directors attend more meetings than male directors and contribute in those meetings. For their contribution to be effective, their behaviour should also affect the working of the board. We find that the board improves its monitoring only when there is an interaction between women and male directors who have experience of working with other women on boards. The effective contribution is also manifested in less risk-taking by the board."

But Angelica cautions against believing that having women on the board will automatically mean less risk-taking:

"It is more accurate to say that boards where women and connected men interact are less likely to take risk. A gender diverse board per se does not have an effect on risk. It is only when those women interact with men that take them seriously that we find an effect on risk."

The message for business leaders and policymakers is clear, says Angelica:

"We find a positive effect from the presence of women on boards when some of their male colleagues have experience on other boards of working alongside women directors. It follows, therefore, that as female board representation increases, women directors will become increasingly effective.

"Through what we call a spillover effect, board gender quotas are likely to reduce prejudice against women directors. However, the full benefit of boardroom gender diversity will only materialise when these prejudices are eradicated."