Monday, November 21, 2011

Do Women Make Board Meetings More Effective? - WAPPP Seminar Series

The Woman: Miriam Schwartz-Ziv, Fellow, Program on Corporate Governance, Harvard Law School
The Talk: When All Are A-board: Does the Gender of Directors Matter? (paper pdf)
The Question: Do Women Make Firm Boards More Effective?

Imagine you're a man walking into a meeting of your firm for the first time and see this group of individuals discussing decisions in the company:

Seems like a pretty normal set-up. A majority-male board -- which remains the standard in most private-sector firms -- awaits you.

Your group of 7-10 people will meet, discuss, and make recommendations to the CEO in an environment that is off the record, behind closed doors.

Now, imagine you walk into the same board room and see this:

Does the gender change effect how productive a company is?

According to Miriam Schwartz-Ziv, mixed gender boards that have 3 or more female directors present at meetings perform better than all-male boards.

Researching over a year's worth of minutes from 11 firms in Israel, Schwartz-Ziv was able to calculate small but significant rises in the amount of initiative boards took relative to previous meetings, as well as how much information the board asks from the CEO (when controlling for 3+ women, she found that there was an 87% increase in asking for information).

According to Schwartz-Ziv, these two metrics imply that there is a "peer monitoring" effect that forces the genders to be more proactive. "Women may tend to not assume as much as men do, so they ask for more information," say Schwartz-Ziv. "And because someone besides men is in the room, there's a feeling of needing to take action'."

What exactly is at play is hard to tell. Since board meetings happen behind closed doors, it's often difficult to understand how content, interpersonal relations, and personality play into the decision-making process. Since the study was conducted in Israel, it's also difficult to know if the results would be replicable in countries where gender parity is far wider, or where women do not have strong leadership roles in the private sector.

Lastly, is the peer monitoring effect a question of gender and status, or just gender? Put another way, if a female secretary were in the room instead of a director, would men still feel pressed to be more productive at their meetings?

While these questions remain, Schwartz-Ziv's study has important policy implications for firms that are thinking about whether or not they should factor gender into their leadership decisions. At best, there is evidence to imply that it may be better to encourage more female leadership at the decision-making process in order to make firms more productive.

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