Beware, Women on Board
Having a diverse board is all the rage at companies these days. But the FT reports on a recent study in the Journal of Financial Economics that suggests this might not be the best idea. The research, which was based on a 87,000 directorships at 2,000 U.S. companies from 1996 to 2003, showed that on average, companies with proportionally more women on their boards were less profitable and had a lower market value. The study also showed that boards with females were more effectively supervised and monitored. (The fact that females attend board meetings more often than males often persuades males to show up.) So for a badly-governed business, women can help. But for companies that run smoothly, the female tendency to “meddle” might be more harm than help. One of the study’s authors, Daniel Ferreira of the London School of Economics, explains.
“Our research shows that women directors are doing their jobs very well. But a tough board, with more monitoring, may not always be a good thing.” Ferreira emphasized that the point of the study was not to protest diversity in the boardroom. “A board is not, after all, exclusively directed towards profit,” he said. “However, we can see that when you meddle with boards there may be unintended consequences. This is particularly important to bear in mind when companies are under increasing pressure to change the composition of their boards.”