This report, witten by Annu Kotiranta, Anne Kovalainen, Petri Rouvinen has been published by the Finnish Business and Policy Forum. This should inspire our shreholders when they chose a CEO…
Summary
Less than a tenth of the CEOs of Finnish firms and less than a fourth of the corporate board members are women. From a social standpoint more women are desired in top management, but should firms’ owners and those represent¬ing their business interests be concerned with women’s role in top management? Since hard facts have been in short supply, we seek to an¬swer the question by applying scientific research methods.
Our results indicate that a company led by a female CEO is on average slightly more than a percentage point – in practice about ten per cent – more profitable than a corresponding company led by a male CEO. This observation holds even after taking into account size differences and a number other factors possibly affecting profit¬ability. The share of female board members also has a similar positive impact. These findings are significant and important not only from a statistical and research perspective but also from a business standpoint.
But why does female leadership seem to con¬tribute to a company’s bottom line? Several suggestions are consistent with our findings, even though – due to data constraints – we are unable to evaluate their respective merits: Women may be better leaders than men. Or it is possible (and even likely) that, due to the more harsh selection process, female business leaders constitute a more exclusive – and thus a more competent – group than their male peers. Female leadership may also be associated with a firm’s overall cultural diversity and multidimensionality as well as good governance and management practices.
Our findings suggest that a firm may gain a competitive advantage over its peers by identifying and eliminating the obstacles to women’s advancement to top management. While there is on average a positive correlation with female leadership and profitability, a too straightforward and wrong conclusion would be that the current male leaders should be replaced by women and that this would improve firms’ profitability. The focus should rather be on the numerous and often difficult-to-observe mechanisms and net¬works that favour men or hinder women from climbing the executive ladder. Gender-neutral career opportunities are – besides being “fair” – also in the best interest of companies.
If and when Finland seeks to increase the share of women in top management, these endeavours should not be hindered because of concerns about private firms’ profitability – quite the contrary, in fact.
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January 27, 2008 at 6:33 pm
Henrik
Do the report discuss in what direction causality goes? Could’nt be the companies hiring women to a larger extent are more open minded to changes in the business enviroment in general, and thus are more profitable?
Anyway, I find one of the possible explanations the authors suggests very interesting; the one saying the female leaders that actually takes place in a board or as a ceo is crème de la crème due to the unfair competetion.