Over the past few years, multiple studies have suggested that adding more women to the C-suite or the boardroom (where there are often no women to be found) can confer a direct benefit to a company’s competitiveness and financial performance, whether in the form of better governance, stronger reputations, or expanded skill sets among leadership.
Organizational psychologist Katherine Klein, a professor at the University of Pennsylvania’s Wharton School, questions those conclusions. “Despite the intuitive appeal of the argument that gender diversity on the board improves company performance,” Klein writes, a survey of peer-reviewed academic research on the subject tells a different story:
Consider two recent meta-analyses that have been conducted to summarize prior research on the topic. Post and Byron (2015) synthesized the findings from 140 studies of board gender diversity with a combined sample of more than 90,000 firms from more than 30 countries. Pletzer, Nikolova, Kedzior, and Voelpel (2015) took a different approach, conducting a meta-analysis of a smaller set of studies — 20 studies that were published in peer-reviewed academic journals and that tested the relationship between board gender diversity and firm financial performance (return on assets, return on equity, and Tobin’s Q).
The results of these two meta-analyses, summarizing numerous rigorous, original peer-reviewed studies, suggest that the relationship between board gender diversity and company performance is either non-exist (effectively zero) or very weakly positive.
Further, there is no evidence available to suggest that the addition, or presence, of women on the board actually causes a change in company performance.In sum, the research results suggest that there is no business case for — or against — appointing women to corporate boards. Women should be appointed to boards for reasons of gender equality, but not because gender diversity on boards leads to improvements in company performance.
Stony Brook University professor Todd Pittinsky made a similar point in the Harvard Business Review last year, regarding the push for more diversity in the tech sector:
Much of the research evidence purporting to show that diversity leads to innovation and to profits is correlational. That is, it shows that diversity and innovation are more likely to occur together but leaves open the question of which causes which — or whether both are caused by something else. If we see more-profitable companies making greater investments in diversity initiatives, it may be that they are the ones that feel they can afford to do so. Wealthy people eat more meat than poor people do, but it isn’t meat that makes them wealthy.
That doesn’t mean there is no business case for diversity, Pittinsky insisted, but rather that the business benefits are neither as direct nor as immediate as we might like them to be. A better case for diversity, he argued, begins with “the self-evident social good it brings” and understands that the economic benefits will follow in the long run:
Interestingly, the social case for diversity does become a business case when one is willing to look ahead to the longer term. The more the members of an organically diverse society enjoy that diversity and see the visible benefits of investing in shared prosperity and the common good, the more secure and resilient that society will be — possibly not at a given moment, but in the long run. Over a span of decades, a safe and resilient society is very good for business.