Female leadership and company profitability

“Firms led by women are 10–20 per cent more profitable than businesses led by men”, the authors of the EVA Analysis Female Leadership and Firm Profitability claim.

How is that possible? On the one hand, female leaders might be a more exclusive and thus on average better group as it takes more for them to climb up the ladder. On the other hand, they just might be better leaders, the authors suggest.

Roy D. Adler, Professor at the Pepperdine University, California confirms these findings. In a study, he and his colleagues analysed the performance of 200 Fortune 500 companies over a period of 22 years. “The correlation between high-level female executives and business success has been consistent and revealing”, he claims. In 2001, the 25 best companies for women outperformed the industry medians in terms of profits (+34%), assets (+18%) and equity (+69%), Mr Adler states here.

Photograph: Marie Claire

Well, some male counterparts might be offended by that. I found a Management Issues article by Barry Wade which made me laugh. Dr Daniel Ferreira from the London School of Economics argues that with more diversity in the boardrooms, “the correlation between the rise in women directors and a fall in profitability needs to be addressed”. Male CEOs may feel “hounded” (Yes, he is truly using the word hounded) as women tend to take their work more seriously. Building on that, he fears that female directors are more likely to remove underperforming CEOs. With all respect, Mr Ferreira, that’s the way it should work, shouldn’t it? Or is the main reason you guys don’t want women in your area that you might have to start working?

Anyway, a four-year study by New York-based consultancy Catalyst supports Mr Adlers findings as well, suggesting that equity returns of US corporations with the highest proportion of female directors were 53% higher than those of corporations with the smallest amount of women on their boards.

Maybe women just end up in more profitable companies. Maybe companies that keep up with the times and are based on competence (no matter if male or female) and not on traditions and established conventions are the most profitable ones.

What do you think?


4 Responses to “Female leadership and company profitability”
  1. Martin says:

    Great post! You have compiled really interesting figures on that topic and your illustration is stunning.

    I think you are absolutely right when you say that good management is not a gender thing. It is more about the skill-set of your management that maybe guarantees you success. And I think that is really important to highlight. Not just biologically, even through our education system and the existing stereotypes in our society, men and women have a different skill set.

    However, the strong emphasis on profitability questionable. Mr. Ackermann once set the target for return on equity to 25% for Deutsche Bank and other companies.With regard to an article in the Handelsblatt Mr Ackermann buried this target (http://tiny.cc/25percent) due to the acquisition of Postbank. Security and sustainable success seem to be more important to the leading German bank. Moreover, family business may not be well known for its diversity in its management or high profitability. But they are well known as popular employer (http://tiny.cc/family_business). So what is more important – profitability or sustainability?

  2. Izzy says:

    Nice picture 🙂 I agree with you, I think there is a correlation between a profitable company being ahead of times and accepting structural changes both in personnel and the organization of the company. I think with women contributing their female attributes, skills and mindset to products and the corporate culture they are more able to attract female customers as well since they know women better. Eventually women make an estimated 50% of the population…

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  2. […] To summarize, we began our journey with the spotlight on Gender Diversity Management, specifically the role of women in the workplace or workforce. We were driven by the idea of the “glass ceiling”. Our initial posts reflect our focus on this topic with posts such as: Does The Future Belong To Women, Less Risk With Women, Women In The Supervisory Boards, Female Leadership-Do We Need A Women’s Quota In The Supervisory Board?, The Amazons, and Female Leadership and Company Profitability. […]

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