· 1 min read · News

Women in the boardroom can damage a company's bottom line


While having more women on the board can improve a company's governance, it can also have a negative effect on its bottom line, according to research from the London School of Economics and Political Science (LSE).

The report showsboards with more women are effective in measures such as monitoring CEOs and women are more likely than male counterparts to attend board meetings and women have a positive effect on diversity and governance.

But the survey of 2,000 companies in the United States, reveals correlation between firms with proportionately more female board members and lower profitability and lower market value. This suggests in well-governed companies, governance could have a negative effect.

Dr Daniel Ferreira, from LSE's department of management, said: "This is a complicated picture. Our research shows women directors are doing their jobs very well. But a tough board with more monitoring may not always be a good thing. Indeed we see increased monitoring can be counter- productive in well governmed companies.

"Clearly the message is not that we need less women on boards, A board is not afterall exclusively directed towards profit. But we can see when you meddle with boards there may be unintended consequences. This is particularly improtant to bear in mind in the current context when companies are under increasing pressure to change the composition of their boards."

But Michelle Brailsford partner at Jupiter Consulting Group and president of the  European Professional Women's Network-London, told HR magazine: " I'd be curious to know the make-up of the boards surveyed that suggests more women on boards negatively impacts profitability and market value. Does ‘having more women in the boardroom' mean one or two?

"Research done by the European Professional Women's Network shows three is the magic number. One  diverse candidate on a board will be influenced by the majority. One single woman on a board will find it hard to be heard. Two women on a board create a special dynamic; if they agree with each other they are representing 'the women's view'. And they can be perceived as ‘conspiring'. Only when there are three women on a board can each individual bring her unique point of view and really add value."