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Diversity on Board!

The report "The CS Gender 3000: Women in Senior Management" demonstrates that companies with more women in the boardroom bring better returns and outperform on the stock market. However, Europe still needs to appoint another 400 women to director positions to meet diversity quotas and targets.

The recent study conducted by Credit Suisse on European diversity levels, confirms that there is still a lot to be done in the field of gender equality. In order to meet national diversity quotas and targets, Europe has to appoint 400 female directors for benchmark stock indices alone. However, it is not only about the percentages and meeting quotas, there is much more at stake.

Diversity Brings Better Results  

The Credit Suisse research team have been analyzing the subject of gender diversity and corporate performance since 2012. The original report found that companies with more diversified boards deliver better returns. As the study took place just after a period of instability and economic distress, there was one question waiting to be answered: Will the findings be sustained in a more economically friendly environment? The answer is yes. The recent study "The CS Gender 3000: Women in Senior Management" confirmed the original discovery. It turns out that the presence of just one woman on the board makes all the difference: "Where there is one female in the boardroom, companies have seen an average ROE of 14.1 percent (sector adjusted) since 2005 compared to 11.2 percent for all male boards." [fig. 1]

The Target Is Still Far Away

Every listed company is required by the European Union law, to implement diversity quotas and to have 40 percent female board members by 2020. This means that the total number of women to be appointed is actually much higher than the 400 required at an index level. With the pace of diversity improvement slowing down, there is a high possibility that some countries, such as France, Germany, Belgium and Spain, will miss their deadlines. Spain especially,  is at the tail-end of the diversity line. In order to meet their 40 percent quota, the Spaniards have to appoint 121 more women directors for the constituents of IBEX 35, the Spanish stock market index. So far, from an index perspective, the companies from the British Financial Times Stock Exchange 100 Index (FTSE 100) are the closest to reaching their target. Women make up as much as 23 percent of the boardroom, with the target for 2015 being 25 percent.

Are All Managerial Posts Equal?

While the proportion of women in senior management is similar to that on the boards, there is another division visible. As stated in the Credit Suisse report: "The participation of women in top management tends to be skewed towards areas of less influence and with lower promotions opportunities." The highest percentage of female managers is within Shared Services, while the lowest is at CEO level. [fig. 2]. It seems that women rather have a supervisory role than a role with direct influence. The question whether it reflects their vocational preference or  whether there are other underlining reasons, remains unanswered. 

The Main Obstacles

The research team named three main obstacles to achieving greater gender diversity: cultural biases, workplace-related biases and structural/policy issues, with the first obstacle being the most difficult to overcome. Introducing diversity policies, quotas and targets can open a debate and make the subject widely known, however, there is another powerful, yet silent ally – globalization. The researchers believe that the closer integration of global economy, along with more global client base and management, will bring a significant cultural change: "The internationalization of education, admittedly at an elite level, along with cross-border work experience, should gradually help to ‹import› more liberal and accepting attitudes towards women in the workplace."

Benefits for All

The increase in diversification means a plethora of ideas and concepts, a variety of points of view that can trigger discussions or deliver innovative solutions as well as a wide scope of versatile skills and expertise. As the report concludes: "It is not a case of a greater ability of one gender versus the other but that a more diverse group makes for better decision making and corporate performance."