This article delves into a comprehensive study conducted by Margarethe Wiersema and Marie Louise Mors, focusing on women and men directors across more than 200 publicly traded companies on major stock exchanges in the U.S. and Europe. The study yields valuable insights into the influence of women on board dynamics, shedding light on their contributions to decision-making processes. Rather than conforming to traditional norms, women directors bring unique qualities that positively affect board discussions.
In November 2022, a regulation was passed by the European Union mandating that companies in EU member states strive for a new target: ensuring that women make up 40% of non-executive directors on the boards of publicly traded firms by 2026. The regulation aimed to establish gender balance in the boards of large listed EU companies, promote transparency in board appointments, and ensure objective assessment of candidates based on merit rather than gender.
However, the question arises: will the presence of women on boards significantly impact their functionality? While there is a common belief that having women on boards enhances effectiveness, understanding actual boardroom dynamics remains challenging due to the confidential nature of meetings and directors’ reluctance to disclose proceedings. This lack of transparency hinders a comprehensive understanding of how the presence of women influences board dynamics and firm outcomes.
“To bridge this empirical gap, we conducted in-depth interviews with male and female directors who collectively served on the boards of over 200 publicly traded companies in the U.S. and Europe. Utilizing semi-structured interviews with open-ended questions, we aimed to uncover firsthand narratives shedding light on boardroom behavior and discussions when women are board members. The results of our study yield surprising insights into how the presence of women shapes boards.” stated Margarethe Wiersema and Marie Louise Mors.
Researcher found out that firstly, women directors emerge as highly prepared and focused on accountability during board meetings. Women are described as diligent “worker bees,” bringing thorough preparation and a readiness to engage in the work. This level of preparation equips them with insightful questions that contribute to decision-making.
Secondly, women directors exhibit behaviors that deviate from traditional norms. Contrary to the notion of boards as exclusive clubs resistant to change, women directors openly admit when they lack knowledge, ask probing questions, and encourage open discussion. Their willingness to challenge the status quo contrasts with the perceived reticence of men in similar roles.
Women also enhance the quality of board discussions in multiple ways. Their presence compels executives to be more engaged, and they contribute to depoliticizing dialogues. This shift creates a more open atmosphere, facilitating discussions on topics that might otherwise be overlooked.
In conclusion, the presence of women on boards appears to alleviate the issue of “pluralistic ignorance,” fostering nuanced and in-depth boardroom discussions.
“While our qualitative study cannot directly measure performance effects, our findings suggest that women’s presence may indeed enhance corporate governance and contribute to better decision-making.” concluded both researchers.
Furthermore, the study challenges prevailing assumptions about women in business. Women directors, as revealed in the interviews, exhibit autonomy, rationality, and a commitment to making the best decisions for the board, challenging stereotypes about women in the workplace. Contrary to expectations, they are less concerned about fitting into board norms and more focused on contributing to optimal decision-making processes.
“If you are sitting around the table but you say nothing, that’s a lost opportunity. Move beyond that and say something about what you have to offer. The reason you’re there is because you have something valuable that can be added.” Ursula Burns, former CEO of Xerox Corp. Photo source: bloomberg.com, photographer: Christopher Pike.
About the authors of the research:
Margarethe Wiersema is the Dean’s Professor of Strategic Management at The Paul Merage School of Business, University of California, Irvine. She is globally acknowledged as a prominent authority in the fields of corporate strategy and CEO succession and replacement, boasting a portfolio of over 50 publications and garnering over 7,000 citations. Her research has been cited by renowned media outlets such as the New York Times, The Financial Times, The Economist, Fortune, Business Week, and the Washington Post.
Marie Louise Mors serves as a Professor of Strategic and International Management at the Copenhagen Business School (CBS) and has previously held a faculty position at the London Business School. Her contributions to the field are featured in leading strategy and management journals, including the Strategic Management Journal and Academy of Management Journal.
Source: https://hbr.org/2023/11/research-how-women-improve-decision-making-on-boards