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There are Benefits to Giving Women Greater Access to the C-Suite

Characteristic Traits of Behavior Make Women More Moral Than Men

I have previously blogged about women and the glass ceiling and how they have been lagging in C-Suite positions. Along comes a research study from the Harvard Business Review that seems to show an increase in gender diversity but raises questions about where we go from here to bring equality into the boardroom.

According to the Corinne Post, Boris Lokshin, and Christopher Boone, writing in the Harvard Business Review, research has shown that firms with more women in senior positions are more profitable, more socially responsible, and provide safer, higher-quality customer experiences — among many other benefits. Also, there is a clear moral argument for increasing diversity among top management teams (TMTs). But when it comes to explaining why having more female executives is associated with better business outcomes, and what specific mechanisms cause those positive changes, existing research is much more limited.

The researchers set out to explore these questions by examining exactly how firms changed their strategic approach to innovation after appointing female executives. They tracked appointments of male and female executives and analyzed R&D expenses, merger, and acquisition (M&A) rates, and the content of letters to shareholders for 163 multinational companies over 13 years to determine how these firms’ long-term strategies shifted after women joined their TMTs. Specifically, they were able to identify three distinct trends around shifts in firms’ strategic thinking following the appointment of female executives:

  1. Firms became more open to change and less open to risk
  2. Firms shifted focus from M&A to R&D
  3. The impact of female appointments was greater when women were well-integrated into the TMT.

The researchers also found that the more effectively female executives were able to integrate into the TMT, the greater the impact they were likely to have on its decision-making. There are two key factors that can influence this:

  • Whether she is the only woman.
  • Whether she is one of many new appointees: 

With respect to being only one of many new appointees, the authors found that larger shifts in thinking occurred when the new female executives were part of a smaller cohort of new appointees. In other words, if a firm promoted 10 men and 2 women to senior roles, they would see less of an impact than if a firm promoted 5 men and 1 woman. This could be because incumbent senior managers may feel more threatened when a larger group is promoted into their midst, leading them to be less trustful and less welcoming of the newcomers, and thus limiting new executives’ ability to contribute effectively.

Why Is Having Women in the C-Suite So Impactful? Glass ceiling

As to the question of why having women in the C-Suite is so impactful, the researchers found that the role of caring and thoughtful helps deliberations on strategic issues. Women also learn to stand out by promoting novel strategies in an effort to overcome stereotypes of timidness, but at the same time, the hyper-visibility that comes with being the only one of an underrepresented group drastically increases the professional costs of making mistakes, and so they learn to carefully weigh the benefits of their innovative proposals with the risks of potential failure. Based on this common experience, one could expect TMTs to become more focused on balancing innovation with risk mitigation as more women join their ranks.

In addition, prior research suggests that female executives are likely to care less about tradition and are more open to challenging the status quo than their male counterparts. Behavioral psychology has found that these sorts of attitudes fundamentally increase others’ receptiveness to change, and so it would make sense that as more women are appointed to executive teams, it could trigger more open-mindedness in existing TMT members.

Similarly, if the individual women entering the TMT are on average more risk-averse (as studies suggest is often the case), their presence could cause the entire team to become more cautious. When an individual who seems more risk-averse enters a group, research has found that it can cause other group members to believe that the group as a whole is more risk-averse than it actually is, which can in turn lead everyone to become less open to risk.

Finally, it is also possible that these changes are simply the direct result of increasing diversity in the TMT. Research suggests that having more diverse perspectives to weigh in on key decisions can make a group more open to change, and more likely to see change as feasible. At the same time, having a wider range of opinions to consider often slows down decision-making, decreasing the chances that the group will make rash or risky decisions.

Furthermore, while their study focused solely on how firms change when women join the TMT and did not include information about the impact of other forms of diversity, they would expect to see similar findings for members of other underrepresented groups, such as racial and ethnic minorities. Research suggests that the career trajectories of these executives have much in common with those of women who make it to the top, and so while it is outside the scope of our current work, they would not be surprised to see similar patterns for TMTs that add members from any underrepresented group.

As my research has found, women tend to make more moral decisions than men. Perhaps that is why so few scandals occur when women are at the helm. This argues for more women in the C-Suite to serve as a barrier against financial and other frauds.

Posted by Dr. Steven Mintz, The Ethics Sage, on April 28, 2021. You can sign up for his newsletter and learn more about his activities at: https://www.stevenmintzethics.com/. Follow him on Facebook at: https://www.facebook.com/StevenMintzEthics and on Twitter at: https://twitter.com/ethicssage.