What difference do women really make on boards?

29 Jan 2009
Research by UQ Business School's Renee Adams has found that women appear to significantly enhance the monitoring capacity of the boards they join. Using detailed data sourced from the US Investor Responsibility Research Centre, Professor Adams and co-researcher Dr Ferreira sought to answer the following questions: Do board inputs (director attendance and committee assignments) vary with gender diversity? Does the gender composition of the board affect measures of governance, such as CEO turnover and compensation? Does the effect of gender diversity matter enough to affect corporate performance? Professor Adams said the findings showed that boards with more female directors were characterised by: Greater participation of directors in decision-making (through attendance and committee assignments) Tougher monitoring of the CEO (through greater turnover-performance sensitivity) More alignment with the interests of shareholders (through equity-based compensation). Professor Adams said the research provided empirical evidence to support what has - until now - been a largely ideological debate. She said, "Boards around the world are under pressure to recruit more women with some countries legislating quotas to improve diversity on boards. "From January last year, companies in Norway have been required to ensure at least 40% of directors are female. "Spain is following suit with their quota - also 40% - coming into effect from 2015 and Sweden is threatening to do the same," she said. "The research suggests there will be a measurable improvement in the monitoring capacity of boards incorporating more women. "However, our findings do not support the argument for quotas as increased monitoring can be counter-productive in well-governed companies. "Ultimately decisions about board composition must be made at the company level, taking into account other board characteristics. "What our evidence does show is that women board members are not mere tokens." The research is to be published in the Journal of Financial Economics.