Female corporate directors make better decisions on complex issues than men, raising questions about whether boards are doing a disservice to investors when they include no women, a new study argues.
A review of decision-making processes used by 624 Canadian corporate directors found women scored higher on average on sophisticated “complex moral reasoning” skills, which suggests they make better decisions on complicated matters.
The findings mean boards “may actually be shortchanging their investors” if they have no women around the table, says study co-author Chris Bart, a business professor at McMaster University in Hamilton.
“There’s no good reason why women shouldn’t be represented on a board at the same level [as men],” Prof. Bart said in an interview.
“You may in fact be derelict in your duties as directors by depriving your shareholders of board members who innately appear to have superior decision-making capabilities. So what reason would you have for keeping female representation at such a low level?”
Women account for 10 per cent of directors on boards of publicly traded Canadian companies, according to women’s advocacy group Catalyst, and that percentage has barely shifted for years. Catalyst and other groups have done research in recent years arguing companies with more women on their boards have better financial results, although the researchers say it is hard to know whether female directors cause the better returns.
Prof. Bart says his research suggests there could be a logical connection to better corporate performance if women make better decisions on complex matters.
Despite their ability, he argues the ongoing shortage of women on boards is not due to a shortage of women in top ranks, but is actually caused by a reluctance by some men to hire women because they have a more challenging decision-making style and are less deferential to tradition or defined power structures.
“Men are pack animals and they are highly deferential to power structures.... A woman comes on a board, and she says ‘I understand tradition and the way you’ve always done things, but let’s look at it differently, and why are we doing it the same way we’ve always done it for 50 years,’” he suggests.
Prof. Bart and research partner Gregory McQueen of A.T. Stills University in Arizona examined test results from directors who participated in the Directors College training course for corporate directors in Canada and completed a decades-old standardized test known as the Defined Issues Test, which measures how people make decisions on complex matters.
The good news for investors is that both male and female directors did well on the test, which means directors on average are good decision-makers. But women proved better on average at applying “complex moral reasoning” factors in decision-making, which involves considering viewpoints of multiple groups, using co-operative and consensus-building approaches and applying decisions in a consistent and non-arbitrary fashion.
A greater proportion of men, by comparison, relied more on making decisions based on rules, regulations, or traditional ways of doing business or getting along, according to the findings, which have been published in the International Journal of Business Governance and Ethics.
Prof. Bart suggests the differences may be “genetically driven,” and women may simply be wired to have better social co-operation and consensus-building skills.
“That skill is inbred in women much more so than it is in men. When it comes to making decisions at the board level, you need this level of inquisitiveness, you need this ability to see more possibilities and alternatives to make a decision that’s judged to be more fair and consistent over time. And women seem to have this innate ability.”Report Typo/Error