Why, profit-wise, they do just great, thank you very much. Just as well -- if not better -- than companies with all male boards. But, when it comes to stock market performance, these companies are systematically undervalued. (All boldface added by moi.)
The research suggests that shareholders respond negatively to women being appointed to their boards, causing share values to decline. This is consistent with other recent research that has examined responses to the appointment of female CEOs in the United States.
The team from the University of Exeter's School of Psychology and Business School conducted a comprehensive analysis of performance data from all FTSE 100 companies between 2001 and 2005. This found that companies with all-male boards had a market valuation equivalent to 166% of their book value, while companies with at least one female board member had a market value equal to just 121% of book value.
However, the research also showed that appointing a woman to a company board does not compromise objective measures of financial performance, specifically, Return on Assets and Return on Equity. In fact, within the data set as a whole there was evidence that companies with women on their board were a far better investment than those without.
This suggests that shareholders systematically over-value companies will all-male boards, while being unenthusiastic about the appointment of women to senior positions. This is despite there being no evidence that women's appointment has an adverse impact on company's performance.
The findings also fit with previous research from the University of Exeter which has shown that women are appointed to leadership positions when a company is in crisis. Dubbed the 'glass cliff' phenomenon, this trend involves women being placed in precarious positions when there is a high risk of failure. This has led to women being associated with weak performance.
Lead author Professor Alex Haslam, a psychologist at the University of Exeter who developed the ‘glass cliff’ theory with his Exeter colleague Professor Michelle Ryan, said: “Our study shows very clearly that shareholders tend to devalue companies with women board members and to chronically over-value those with all-male boards. What is not clear is whether this is because shareholders feel that women perform less well on boards than men or whether they see a woman’s appointment as a signal that the company is in crisis. Whatever the reason, it is clear that this response is unwarranted, because there is no objective evidence that having female board members damages a company’s performance. If anything, the opposite is true.”
The Exeter study comes just a week after a study by academics at the London School of Economics and Political Science found having more women in the boardroom can have "a negative effect on financial performance''.
While companies with more women on their boards tend to have better corporate governance, they are less profitable and have a smaller market capitalisation, according to the LSE paper.
Which makes sense, when you think about it. Men tend to be bigger risk-takers -- and that's not necessarily a good thing when it comes to high finance. Many have theorized that, had more women been in the investment banking business, there would not have been all that crashing and burning we saw last year.
Employing more women in the boardroom can wreak havoc on the financial performance of companies, fresh research suggests.
Two academics found that female directors were more likely to 'meddle' with boards and get rid of male chief executives who are not up to the job.
However, their more ruthless approach could produce unexpected results and be 'bad for a company's coffers', the study found.
Couldn't ''decrease profitability'' do? Couldn't ''hold to higher/tougher standards'' or ''question'' do?
That the studies contradict each other doesn't surprise me. Especially since I poked around the much more extensive relevant research on the U. of Exeter's site.
It's all about ''the glass cliff.''
in a study of FTSE 100 companies, Haslam and his team discovered that most appointed women to senior positions only after a downturn in their fortunes, leaving them standing on the edge of a "glass cliff."
"It takes the form of a glass cliff, where women are more likely to be appointed to precarious positions than men," Haslam told the British Association science festival in Exeter.
"What was found was that in all of those cases women had only been appointed after company performance had slumped quite dramatically.
"So women are parachuted into rather hazardous leaderships situations. What is typically happening is that if everything is going well with a company there is no motivation for change; you can carry on with the same 'jobs for the boys' approach."
With failing companies likely to attract adverse media attention, women in "glass cliff" positions are more exposed to public criticism and risk being blamed for a management failure that had already occurred before their appointment, Haslam said.
All of which goes to show, to paraphrase Nicholas Kristof, had there been some Lehman Sisters in with those Lehman Brothers, maybe the company would not have gone down in the biggest bankruptcy in U.S. history.
Bottom line: No wonder women are still fighting for pay equity. According to this research, as soon as they crack that glass ceiling, they're set up to fail.