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Kennedy School Review

Topic / Business and Regulation

For Struggling Boards, the Answer May Be Closer than You Think


There is a scene in The Iron Lady film where the actress who plays Margaret Thatcher is walking defiantly down a marble hall; the camera zooms in on her solitary pair of high heels amidst a sea of squeaky parliamentarian loafers. Thatcher pushes open the door to the lady’s restroom only to find a lonely ironing board waiting to press the suit of one of the countless MPs whose loafers we have just seen on the screen. The leitmotif of the scene could not be clearer: this is a world where even the women’s bathroom is designed to support the men.

To those of us who live in Western democracies, these images—and the pronounced gender disparities they represent—may seem antiquated. Yet in the United States today, women constitute only 3.6 percent of Fortune 500 CEOs and hold only 16.1 percent of Fortune 500 board seats, despite the fact that they make up 51 percent of the population as a whole (Soares et al. 2011a). Contemporary boardrooms, both in America and abroad, are not nearly as far removed from Thatcher’s era as we would like to believe.

Throughout the history of the struggle for gender equality, moral- and fairness-based arguments have been used to advocate for women’s rights. Today, however, there is a new dimension to the gender discussion: corporate profits and performance. For more than ten years, Catalyst, a nonprofit focused on women and business, and McKinsey & Company, a global consulting firm, have each tracked the effects of diversity on corporate performance. The research from each organization suggests that gender diversity in the boardroom is not only the right thing to do, it’s also good for business and, by extension, the economy as a whole.

At just 16.1 percent, the overall proportion of women on Fortune 500 corporate boards is low. A 2011 study by Catalyst found that women filled between zero and 18.3 percent of Fortune 500 company board seats (Soares et al. 2011a, Appendix 7). For women of color, the number is even worse. In 2011, non-White women held only three percent of board seats, and more than two-thirds of companies had no women of color on their boards at all (Soares et al. 2011a).

The dearth of women on corporate boards is not specific to the United States. Globally, women represent 9.8 percent of board members, according to a 2011 study from GovernanceMetrics International (2011), an independent firm rating corporate governance. Among industrialized economies, the number swings from less than 1 percent in Japan to 35.6 percent in Norway. Although the percentage of women on corporate boards in the United States is incrementally increasing—up from 15.7 percent in 2010 to 16.1 percent in 2011— at its current rate of increase, it would take more than eighty-four years for women to gain equal representation on boards.

However, there may be reason to think that things will speed up. Research by Catalyst and McKinsey & Company finds that, on average, Fortune 500 companies with three or more women on their board of directors—often deemed a  “critical mass”—substantially outperform companies without any female board members (Kanter 1977, cited in Carter and Wagner 2011). Over a four-to-five-year period across many different industries, these companies showed, on average, an 84 percent increase in return on sales (ROS), a 60 percent increase in return on invested capital (ROIC), and a 46 percent increase in return on equity (ROE) relative to their peers (Carter and Wagner 2011). Figure 1, courtesy of Catalyst, highlights the difference in companies with zero women on the board of directors (WBD) compared to those organizations with three or more (Carter and Wagner 2011).

Figure 1 — Difference in companies with zero women on the board of directors (WBD) compared to those with three or more (courtesy of Catalyst) (Carter and Wagner 2011).

Companies with women on their boards see gains beyond their balance sheets. McKinsey’s 2011 study identified nine key drivers of a company’s long-term health, including such factors as direction, leadership, and organizational culture. Its researchers found that companies with women on their boards performed better across all nine of these dimensions as compared to their male-dominated peers (Boardroom Diversity 2011).

At roughly the same time as the McKinsey study, Catalyst released a report demonstrating that companies with more equitable gender distributions tend to have higher levels of corporate philanthropy by a factor of almost thirty to one. According to researchers, every additional woman on a corporate board increased charitable giving by up to $2.3 million (Soares et al. 2011b). These findings hold true even when other factors like industry, corporation size, and baseline performance level are taken into account, suggesting that gender-inclusive boards are not only good for business and the economy but for society as well.

While this research may surprise the average consumer, many in the industry are familiar with the business rationale for incorporating women into the boardroom and, more broadly, into the company’s strategic initiatives. Today’s business leaders understand that women are a largely underutilized source of creativity, innovation, and talent and that these skills generally translate into an improved bottom line, increased long-term internal diversity, and a more socially responsible company. Yet in spite of the research, women are still woefully underrepresented in the boardroom. In today’s data-driven and profit-demanding corporate world, why have corporations not increased the number of women on their boards?

More of a Bottleneck than a Ceiling

Current research suggests that many factors may compromise a woman’s ability to reach the top. Rather than a glass ceiling the problem may be more of a bottleneck. After all, women hold 51.5 percent of management positions but only 14.1 percent of executive officer positions (Catalyst 2012). For companies to excel and stay competitive, they must address this impasse. But where exactly is it that women’s advancement is being held up?

In the Pipeline

A common response to explain the dearth of female board members and CEOs is that too few qualified women are present in the pipeline. This belief purports the absence is largely due to the fact that many women drop out of the workforce when they have children, and that afterwards, they either delay return or never return at all. To some extent, this is true. Myra Hart, a Harvard Business School professor conducting research on the school’s alumni, finds that women suffer almost no career setback at all when they leave the workforce for short periods of time. “The issue isn’t around three to six months maternity leave,” she told me one day in her office (Hart 2012). Hart finds the real career challenges occur somewhat later, “usually two to three years after the birth of a second child when the increasing demands of multiple schedules and more complex parenting issues result in women reducing their work commitment or exiting the paid workforce altogether for a period of several years” (2012).

She observes that, “Women with advanced degrees in business, law, and medicine are very likely to have partners who are also well-educated and have high earning capacity. Their families often have the financial wherewithal to live on a single income. Many couples perform a type of cost-benefit analysis and find the man’s career has a higher probability of financial and professional returns” (Hart 2012).

However, the logjam can be traced back to an even earlier point. A 2010 study by Catalyst that surveyed more than 9,900 alumni from twenty-six top-tier MBA programs in the United States, Europe, Asia, and Canada who graduated between 1996 and 2007 found the discrepancies between male and female career advancement start right from the beginning (Carter and Silva 2010). After controlling for parental status, experience, industry, and other variables, male MBA graduates still earned an average of $4,600 more than their female peers and were also more likely to be given a higher-ranked job. The study found that even when women and men started at the same level, men outpaced women significantly in climbing the corporate ladder and that “only when women were hired at mid-level or senior executive ranks were there no significant differences between the rate of men’s and women’s career advancement over time” (Carter and Silva 2010).

Outside Personal Networks

Embedded in the legacy of historically male-dominated industries, many companies may not realize their biases in favor of men. For instance, traditional methods of networking, coaching, or mentoring, which were developed when corporate management was almost entirely male, may not necessarily work for women.

Harvard Business School (HBS) professor Rosabeth Moss Kanter says that discrimination still takes place in the corporate world, though, unlike in past eras, this discrimination is usually informal and unintentional. Kanter summarizes this phenomenon in a 2010 HBS interview: “I think one of the hidden sources of discrimination that still goes on in many companies is sort of informal and behind the scenes. When there’s a discussion in a private conversation about, ‘Well, who are the people that we should put into certain positions?’ And then, ‘Well, she isn’t quite as dedicated’ or ‘We love the fact that she has a family, and we’re very family friendly; we don’t want to take her away from the family’ and so they don’t even give the woman a choice” (Kanter 2010).

Kanter is a pioneer for encouraging organizations to achieve a “critical mass” of women in their leadership structures. Her initial research, first published in the 1977 book Men and Women of the Corporation, found that when women held one-third of positions, it prevented tokenization and encouraged equal evaluation, allowing women to be perceived beyond their traditional gender-based roles.

Research from Harvard Kennedy School professor and Academic Dean Iris Bohnet corroborates Kanter’s four-decade-old-thesis on the importance of having two or more females on a company’s board. Bohnet recently analyzed the perception of “luck” and “effort” on performance-based outcomes. She found that performance was significantly lower when people had less access to information and consequently attributed their success—and the success of others—to mere “luck” (Bohnet and Saidi 2011). Thus, in the absence of social networks or people similar to themselves, individuals were less likely to succeed and more likely to attribute the success of others to factors outside of their control.

In addition, a 2008 study from Catalyst, “Advancing Women Leaders: The Connection Between Women Board Directors and Women Corporate Officers,” found that companies with multiple female board directors were more likely to have a higher percentage of women as corporate officers five years later (Joy 2008). This means that having women in the corporate ranks and the executive levels provides a signal, as well as an opportunity, for women to mentor other women.

By Our Own Individual Bias

Finally, there is an individual bias, shared by women and men alike, when we picture business leaders or elect board members. The youngest and first female partner of Goldman Sachs, Jacki Zehner, has written extensively on the underrepresentation of women in the corporate world. In a 2011 article, “Saying ‘No’ to All-Male Corporate Boards,” she argues that one indisputable fact about male corporate boards is that we, as shareholders, elect them (Keefe and Zehner 2011). While the board may be groomed from former or current CEOs, we have the opportunity to choose who we want to represent us. Even when we are not intending to be gender-biased, when we imagine a CEO or corporate leader in our mind’s eye, the image is almost always male. This bias seeps into our unconscious and stays, unwittingly perpetuating the gender inequality and “old boys” networks that continue to hold women back in corporations across the United States and world.

The Process, the Solution

Many international corporations already openly recognize the business case for diversity and are encouraging in-house methods to increase and promote parity. IBM, General Mills, Proctor & Gamble, Coca-Cola, McKinsey, and many others have internal initiatives to train and mentor women while simultaneously making diversity a key component in their company’s long-term growth (Spence 2010). IBM created the Women’s Task Force in 1995 to groom and promote female leaders, eventually leading to a 592 percent increase in female executives; General Mills currently sees five of its seven major divisions run by women, which is not surprising given that nearly 75 percent of consumer purchasing decisions are made by women; and Kraft recently implemented an internal coaching program specifically targeting high-potential women and people of color (Spence 2010).

While some countries, like Belgium and Italy, have recently passed legislation assessing fines on companies that do not achieve a specific critical mass of women within certain timelines, these kinds of policies would likely face a strong backlash in the United States. In recent years, American companies have tended to shun government interventions of all varieties, quotas have been viewed as discrediting merit, and incentives have been seen as biasing individual selections. If the European stick approach won’t work in the United States, perhaps the American government could offer carrots? The United States might consider extending tax credits to companies providing paid maternity and paternity leave or child care, along with other incentives for companies that are openly addressing diversity issues.

But achieving greater diversity ultimately comes down to corporate policy. Recent research from McKinsey finds that leadership is the crucial point for setting the tone when it comes to women’s hiring. A commitment from a company’s top-level leadership—particularly the CEO—to increase diversity is perhaps the most critical component to challenging the status quo. Given the skewed gender representation on corporate boards today, ironically, this leadership usually needs to come from a man (Boardroom Diversity 2011).

What should this leadership look like? To be successful the CEO must be openly committed to the issue both internally and externally. Companies must make public goals and hold themselves accountable through transparent performance measures. In addition to this top-level commitment, companies must also work to embed diversity into the fabric of their corporate culture. Paid paternity leave, diversity recruitment bonuses, and on-site day care are just three examples of how companies can work to foster diversity and increase equality in their corporate culture. But companies have to support these initiatives as well, and they usually need the buy-in from the CEO and the board to do it.

Long-term, sustainable corporate commitment is perhaps the most promising lead from the last decade of research. As one of five recommendations to “close the leadership gap” in business, “The White House Project Report: Benchmarking Women’s Leadership” (2009) specifically requests: “CEOs [to] develop a plan for advancing women onto their boards” and places specific importance on boards and companies to achieve the “critical mass.”

But the report is invested for more than parity’s sake: having women in the workforce increases economic growth. A 2007 Goldman Sachs report, “Gender Inequality, Growth and Global Ageing,” found that: “Closing the gap between male and female employment would have huge economic implications for the global economy, boosting US GDP by as much as 9%, Eurozone GDP by 13% and Japanese GDP by 16%” (Daly 2007).

In the current economic downturn, coupling equality with corporate strategy may improve both the corporate bottom line and the economy at the same time. Removing the last vestiges of Thatcher-era ironing boards within American business—especially the underrepresentation of women in corporate leadership—would do much to help us get out of the recession and revitalize the twenty-first century American economy.



Boardroom Diversity. 2011. SAIS Global Conference on Women in the Boardroom, Johns Hopkins University, 9 September. Video available (

Bohnet, Iris, and Farzad Saidi. 2011. Informational differences and performance: Experimental evidence, 29 November.

Carter, Nancy M., and Christine Silva. 2010. Pipeline’s broken promise. Catalyst.

———, and Harvey M. Wagner. 2011. The bottom line: Corporate performance and women’s representation on boards (2004-2008). Catalyst.

Catalyst. 2012. The Catalyst pyramid: U.S. women in business, January.

Daly, Kevin. 2007. Gender inequality, growth and global ageing. Global Economics Paper No: 154. Goldman Sachs.

GovernanceMetrics International. 2011. 2011 women on boards report. GovernanceMetrics International, 8 March.

Hart, Myra. 2012. Interview with author, 9 February.

Joy, Lois. 2008. Advancing women leaders: The connection between women board directors and women corporate officers. Catalyst.

Kanter, Rosabeth Moss. 1977. Men and women of the corporation. New York: Basic Books.

———. 2010. Women, ambition and (still) the pay gap. YouTube, 2 April.

Keefe, Joe, and Jacki Zehner. 2011. Saying “no” to all-male corporate boards. Huffington Post, 6 April.

Soares, Rachel et al. 2011a. 2011 Catalyst census: Fortune 500 women board directors. Catalyst.

———, Christopher Marquis, and Matthew Lee. 2011b. Gender and corporate social responsibility: It’s a matter of sustainability. Catalyst.

Spence, Betty. 2010. NAFE 2010 top 50 companies for executive women. National Association for Female Executives.

The White House Project. 2009. The White House Project report: Benchmarking women’s leadership.


This article was originally published in the 2012 edition of the Kennedy School Review.

Melissa Sandgren is a 2013 Master in Public Policy candidate at the John F. Kennedy School of Government at Harvard University, focusing on international and global affairs.


Photo source here.