Businesses looking for a way to turn some extra profit might want to consider a simple solution: hire more women for leadership roles. According to a working paper released by the Peterson Institute for International Economics, a prestigious Washington-based think tank, the presence of female executives likely strengthens corporate performance.
A firm that fills 30 percent of its senior leadership with women could see a six-percentage-point increase in net margin compared to a similar company with no women in executive roles, concluded researchers Marcus Noland, Tyler Moran and Barbara Kotschwar.
“The correlation between women at the C-suite level and firm profitability is demonstrated repeatedly, and the magnitude of the estimated effects is not small,” they wrote.
Many stand to gain, too. At the moment, researchers found, women are sorely underrepresented on corporate boards and in the C-suite. Out of 21,980 firms in 91 different countries surveyed in 2014, nearly 60 percent had no female board members. Just over 50 percent had no female executives. Less than 5 percent had a female CEO.
Some countries — like Norway, Iceland and France — have gender quotas for corporate boards. Like with previous studies, researchers found those rules had no impact on company performance. The presence of a female CEO had a similarly negligible effect on business, while the share of female board members had a larger — though still modest — impact, according to the paper. However, firms with female executives are likely to outperform comparable firms without female executives.
Researchers suggested a couple of factors that explain why — for one, “the existence of discrimination against women executives, which gives nondiscriminating firms an edge. Alternatively, it could be that the presence of women contributes to superior performance via functional diversity,” the paper said.
The research also found certain industries to be more gender-inclusive than others. Companies in the financial services, healthcare, utilities and telecom sectors are more likely to feature female executives. Industrial and energy companies were less likely to have women in leadership roles.