That’s according to new research from The Peterson Institute for International Economics and EY. The report, Is Gender Diversity Profitable? Evidence from a Global Study, reveals that an organization with 30 percent female leaders could add up to 6 percentage points to its net margin.
This in-depth new study analyzes results from approximately 21,980 global publicly traded companies in 91 countries from a variety of industries and sectors.
“The impact of having more women in senior leadership on net margin, when a third of companies studied do not, begs the question of what would be the global economic impact if more women rose in the ranks?” said Stephen R. Howe, Jr., EY’s US Chairman and Americas Managing Partner. “The research demonstrates that while increasing the number of women directors and CEOs is important, growing the percentage of female leaders in the C-suite would likely benefit the bottom line even more.”
The impact of more female leaders
The numbers are still pretty bleak.
The research uncovered that nearly one-third of companies globally have no women in either board or C-suite positions, 60 percent have no female board members, 50 percent have no female top executives, and less than 5 percent have a female CEO. Yet, the positive correlation between women in C-level ranks and the bottom line is demonstrated repeatedly, and magnitude of the estimated effects is substantial.
It’s not just about “diversity.” It’s about how to make your company more successful. It’s about ROI.
“As many companies and governments have rightly increased their focus on gender diversity in corporate leadership, The Peterson Institute and EY wanted to explore what key areas in business roles and in societal support for women in those roles, have the greatest return for revenue and economic growth,” said Adam Posen, President, The Peterson Institute for International Economics. “We have found that some policy initiatives are more promising than others to deliver benefits while promoting gender equality, and that the emphasis should be on increasing diversity in corporate management. At a minimum, the results from our unique global study strongly suggest the positive impact of gender diversity on firm performance and identify in which sectors and countries the most progress on diversity needs to be made.”
Increasing diversity in corporate management is the key. One of they key findings is the importance of having a robust pipeline of future female leaders.
Work-life balance for men
The data points to other policy indicators positively correlated with gender diversity in management, and thus profitability, that are often overlooked, including the importance of paternal (not just maternal) leave, and openness to foreign investment, which could be interpreted as a sign of broader tolerance for new ways of doing business. Paternity leave – resources that would allow, and even encourage, fathers to participate more equitably in taking care of children – is significantly greater in the economies with more gender-balanced corporations: the top 10 economies had 11 times more paternity leave days than did the bottom 10. Peterson/EY’s research found, perhaps surprisingly, that mandated maternity leave alone is not correlated with increased female corporate leadership shares, though paternity leave is strongly correlated with the female share of board seats.
Women make up more than half the workforce in the United States. Given an opportunity they can have a big positive effect when they are in leadership positions. And women AND men benefit from those improvements.
“This research sheds light on the importance of establishing modern workplace benefits, providing equitable sponsorship opportunities, and creating inclusive work environments, so that both men and women can have equal access to leadership positions,” said Karyn Twaronite, EY Global Diversity & Inclusiveness Officer.