In this episode of Lehigh University’s College of Business IlLUminate podcast, we are speaking with Corinne Post about the light her research sheds on the timely question, "Is the future female?" Post holds the Scott Hartz '68 Term Professorship in Management and is chair of the College of Business's Department of Management.
A mega-analysis she conducted with colleague Kris Byron of Georgia State University found that the presence of women on boards had a positive link to measures of firm performance such as profitability and return on assets—especially in countries where firms are held to higher standards of accountability. Among numerous other studies, Post and her colleagues have found that having women on boards results in higher social performance, much faster recalls of seriously defective, even life-threatening, products, and that support for women on boards is withdrawn when times get tough in a way that does not occur with their male counterparts.
Post spoke with Jack Croft, host of the ilLUminate podcast. Listen to the podcast here and subscribe and download Lehigh Business on Apple Podcasts or wherever you get your podcasts.
Below is an edited excerpt from that conversation. Read the complete podcast transcript.
Jack Croft: In recent years, you and your colleagues have conducted a number of studies looking at the impact that having women in leadership positions has on both corporate culture and performance. One study had a very interesting finding that the more women that were involved on the management team, executives were more willing to invest internally within the company to develop innovation and less likely to pursue higher-risk moves like acquisitions and mergers. What does that tell us?
Post: That’s actually one of the studies I'm probably the most proud of. In that study, I joined forces with Boris Lokshin at University of Maastricht and Christophe Boone at Antwerp, and we wanted to understand what happens in the C-suite after women break the glass ceiling and come in. What we wanted to look at is, does having women in upper echelons cause … firms to find different ways to achieve similar objectives? So what we did is we looked at leading firms in the European markets, and we tracked any appointments that happen of male or female executives, so any appointments at the VP level or above. And we wanted to see whether that affected the pathways firms took to innovate.
When you think about innovation, there are two main pathways for innovation. One is R&D investments—investing internally, growing the firm, building labs, paying scientists, engineers. And the other pathway is mergers and acquisitions. We can increase our innovative capabilities by acquiring firms that we think — I mean, it's always a little bit tricky with mergers and acquisitions to know for sure — but that we think have capabilities that allow us to advance. And usually firms, most large firms, will do a bit of both, but will tend to have more of a dominant focus. So what we did is we logged firms' R&D expenses. We counted the numbers of mergers and acquisitions that they were doing.
And we also analyzed the content of the letters to shareholders for these firms. By analyzing the language in these letters to shareholders, and it's a well-established way of doing this, we can measure, if you like, how the top management team thinks. The language that's being used reflects that thinking. So we analyzed these letters to shareholders in terms of risk aversion and openness to innovation, openness orientation. We did this for 163 multinational firms, and these firms represented 20 OECD countries over a period of 13 years. So we could follow year after year these shifts and appointments of women, looking whether it caused shifts in the thinking of the top management team and whether those shifts, in turn, affected changes in how firms approached innovation — moving towards more or less mergers and acquisitions or research and development. And by the way, we controlled for all sorts of other changes that would occur with new appointments to these top management teams.
What we're able to do is, we're able to identify three really interesting things. One, after women joined the top management team — and this didn't happen after men joined the top management team — after women joined the top management team, the collective thinking of the top management team shifted in the year afterwards to more openness to change and launching new things and sort of being innovative and being less open to risk, so more risk-averse. And it was really almost magical, I want to say, to see the change in language that occurred as a result of following women joining these top management teams. We also found that after the language changed, and we looked at this the year afterwards, firms started doing fewer mergers and acquisitions. And as the language shifted to become more open to change, more open to innovation, firms started investing more internally in R&D. So those were the sequences of events that occurred as women joined top management teams.
And by the way, the impact of these female appointments were greater when women were well-integrated in the top management team. So what does that all mean? It simply shows again, in a different way, that when you include more women in these upper echelons, in this case, in top management teams, it may lead firms to consider a wider variety of ways of creating value in the firms. So maybe the question should be shifting from, "Does adding women lead to better things?" to, "How does adding women add to different or open up the range of possibilities for achieving similar outcomes?"
Croft: With all of the strengths and the benefits that you’ve found in the research you've done across, literally spanning the globe and thousands and thousands of companies, why does progress continue to be so slow in increasing women's representation at the top levels of the corporate world?
Corinne Post: Just to sort of get some numbers here in perspective, until perhaps the end of the 1990s, if you looked at Fortune 500 company boards, women represented 10% of those board seats. From the 1990s until the 2010s, so for about 20 years, it stayed around 11 or 12 percent. And then it started slowly to climb after 2010. And now we are roughly at 28% of board seats for major U.S. corporations. In the UK, as a point of comparison, it's 33% of the FTSE [Financial Times Stock Exchange] 100 firms. So there's progress. It is slow. And sometimes it plateaus.
There are a few reasons for that. One, I think, that's key is that we still have this idea in people's minds that when you add, when you push for more women on boards, you might not get the best people — sort of this myth of meritocracy — this this idea that, number one, before there was any push for women, that meritocracy was the reason why men got on board. It'd be a good question to examine whether that's true. But this notion that if you add women, that maybe they [don’t] have the same qualities. So that would be one. Another related reason is this idea that when you're looking for people to put on a board, you're looking for people [with] certain levels of experience, and we know that the talent pipeline just isn't quite there. I mean, as you move up the organizational ranks, there are fewer and fewer women. That doesn't mean that there's not a large enough pool to draw from so that you could increase that representation. But that means we need to address issues of gender equity and gender representation and progression of women's careers in a much more serious fashion.
And I think another reason still is that many firms, when they are considering board appointments, have perhaps some shortcuts that they use in identifying candidates. I believe those companies that have been doing a much more deliberate examination of the skills that they need on their boards might find that, in doing so, they can expand the range of candidates they might consider for board membership. So to give you an example, if a board says that any board member they appoint needs to be a CEO or have CEO experience, well, clearly that limits the pool. However, it might be that if you're the vice president at a very large division, that gives you similar qualifications as CEO perhaps at a smaller corporation, right? So I think deepening consideration of the skills and the perspectives also that are required on a board would be one way to expand the pool of candidates, if you like, that companies might consider in making board appointments, and that could help with the progress. But we're not quite there, which would explain why that progress is still slow.
Croft: One last question to wrap things up: We started out talking about this phrase "The future is female" that has entered our popular culture lexicon. Is it? And how far off is that future then from all of the things that we've been talking about?
Post: Oh, how far off is that future? I think the World Economic Forum came up with some statistics that show that gender equality is about 151 years away [in North America]. So I don't calculate this; they do. But I think there are ways to perhaps get us there a little bit faster, right? I think it's important, and I also believe organizations are increasingly understanding that there's value in diversity if it's actually used—if different perspectives, ideas, data points, ways of thinking about the world are incorporated in decision-making processes. So even if there are pipeline issues, I don't think all men are equal. But there's a culture in organizations that promote certain ways of thinking. So changing that culture so that different views can be brought to the forefront could be helpful.
And while it seems to be true that women might be bringing different qualities to the board, I think we might be in better shape if we start valuing perhaps what some have called more feminine values or ways of doing things, this ability that women have to think of ourselves as in relation to others, as related to others, having cause and effects amongst each other, this inclination to learn from and with each other, this wider consideration of who we think about as our stakeholders, focusing on addressing and resolving problems rather than trying to avoid blame. All these values, I think, can be incorporated as we move towards more women and more gender parity and can help accelerate gender parity, too. So I think it's about widening how we do work and how we think of our work. And that can happen before or together with more gender parity.