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Looking beyond corporate boards


Director term limits and corporate governance codes, but not quotas, help boost female representation in top executive positions, finds new study from Cambridge Judge Business School and the 30% Club.

2016-03-08-women in boardrooms

Term limits for directors and gender diversity rules in corporate governance codes help improve female representation in top executive roles, but quotas make no real difference, finds a new global study from Cambridge Judge Business School and the 30% Club unveiled for today’s International Women’s Day (Tuesday 8 March).

The study of companies from 42 countries over a decade (2004-2013) found that Colombia (28 per cent) had the highest percentage of female top executives, followed by Finland and Thailand (each 19 per cent), while Japan and Qatar were the lowest ranked (each one per cent). The UK (11 per cent), US (13 per cent) and Canada (14 per cent) finished below the top ten.

“Most research and debate has focused on the proportion of women on corporate boards, which is an important topic but not the final word on women’s role in business.” said Sucheta Nadkarni, Sinyi Professor of Chinese Management at Cambridge Judge and who led the new study along with Research Fellow Dr Elaine Yen Nee Oon and Dr Jenny Chu, University Lecturer in Accounting. “This new study looks at female representation in senior management roles, which is critical in evaluating the role women play in shaping corporate strategies and outcomes.”

The results suggest that “soft legislation” such as director term limits and gender diversity requirements in corporate governance codes have a broader effect, beyond the board, on female representation in executive teams than “hard legislation” such as quotas that do not seem to promote a significantly higher percentage of women in executive teams.

The study focuses on women in the very top executive roles, on the executive or management boards of companies as disclosed by their annual reports. The study examined companies in the Forbes Global 2000 list, limiting the maximum number of companies in any single country to 150 and excluding countries with fewer than seven companies. This resulted in a sample of 1,071 companies from 42 countries from six continents and 56 industries, which were studied in each year of the 10 year period.

“What the research clearly shows is that director term limits and gender diversity requirements in corporate governance codes help boost the number of women in senior management teams,” said Brenda Trenowden, chair of the 30% Club and Head of Financial Institutions Europe at ANZ, the Australia-based banking group.

“It also shows that legislative quotas at board level do not work to redress gender imbalance in senior executive teams – this is a ‘research reality’ that we welcome in so far as it serves to dispel the myth that quotas have a positive trickle-down effect. Diverse talent pipelines are essential to high-performing businesses and the 30% Club will continue to campaign for sustainable business-led change in driving progress on that front.”

The study follows on from research last year headed by Professor Nadkarni and commissioned by BNY Mellon and Newton Investment Management, which found that boosting the economic power of all women in society, rather than quotas, is the most important factor in getting and retaining women on corporate boards.

The new study – entitled Looking beyond corporate boards: drivers of female representation in executive roles – finds the legislative quotas do not contribute to increasing female representation on executive teams. Norway, which is well known for its 40 per cent quota for females on listed company boards, ranked only ninth for female top executive representation at 15 per cent. “Higher female board percentage generated by legislative quotas does not have a spill-over effect in executive teams,” the study concluded.

The study found, however, that gender diversity requirements in corporate codes and director term limits each had a strong positive effect in improving female executive representation.

“The strong positive effect of gender diversity requirements in corporate governance codes on female executive team percentage suggests that the normative value of corporate governance codes in creating gender inclusivity seems to have a broader effect beyond the board in fostering a greater percentage of women in executive teams,” the paper says.

“Director term limits are set to reduce board retrenchment and foster openness and infusion of new perspectives in board activities,” it said. “These goals seem to have strong positive spill-over effects in executive teams and to be conducive to charting pathways for women to rise to executive roles.”

The top 10 countries or territories for female representation were Colombia (28 per cent), Finland and Thailand (each 19 per cent), Malaysia (18 per cent), Hong Kong and Sweden (17 per cent), Israel and Singapore (16 per cent), Norway (15 per cent) and Nigeria (14 per cent). Countries with the lowest percentage were Austria (five per cent), South Korea, China and India (each four per cent), Mexico, UAE, Germany and Saudi Arabia (two per cent), and Qatar and Japan (one per cent).

The study found that women were more highly represented in service industries (11 per cent) than manufacturing (eight per cent), and in low-tech industries (10 per cent) than high-tech industries (eight per cent). The sectors with the highest percentage of female top executives included building contractors and animal specialties, while agriculture and passenger transportation were the lowest.