The numbers of female CEO: what it means for Eu companies

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Trends wordlwide prove that greater diversity in the workplace, from junior employees to c-suits, results in better financial results. This summer, the behavioural science consultancy MindGym put down some numbers to highlight the benefits. The paper argues that businesses with higher levels of diversity outperform and are more innovative. “Companies in the top quartile for gender diversity are 21% more likely to deliver above-average profits than those in the bottom quartile. Those in the top quartile for ethnic diversity are 33% more likely to deliver above-average profits than the lowest quartile.” Moreover, “Inclusive companies are twice as likely to meet or exceed financial targets, three times as likely to be high performing, six times more likely to be innovative, and eight times more likely to achieve better business outcomes.”

When it comes to metrics about innovation, more diverse organizations reach better results. “Companies with above-average diversity also produce more revenue from innovation (45% of their total) than those with below-average diversity (26%).” Looking specifically at managerial and c-suits levels, MindGym points out, “Across 1,700 companies in nine countries, those companies with more diverse management teams have 19% higher revenues from innovation, with EBIT margins 9% higher than below-average companies. In a study of 5,000 board members across 60 countries, those boards with greater gender diversity were more likely to prioritise innovation.”

Yet, even if increased diversity is reported to affect even well-being (inclusive companies are four times more likely to report high levels in this sense), and a diverse managerial team is considered to tackle the risk of “groupthink” – that can happen when teams are too homogenous -, diversity in executive roles is still “lagging behind”, as reported in “More Work Still to be Done” by the global credit rating business DBRS Morningstar on the state of the European banking sector. Commenting on the numbers, Charlotte Cervin, senior analyst at Global FIG, DBSR Morningstar, stated: “gender diversity is higher at banks with higher credit ratings. Women represented on average 40% of board seats for banks rated in the AA (low) to A (low) range compared to only 30% for banks rated BBB or lower.

Female CEOs in the Union are only 7%

The situation is undeniably gaining momentum and showing signs of improvement, especially on boards. As EWOB – European Women on Board – network mentions: the number of women appointed has increased in the last decade, reaching 35% in 2021. But yet, female CEOs in the Union are only 7%. Out of 668 companies, they report, 50 have a female lead. Indeed an increase from the numbers recorded in 2020 (42), but growing too slowly. Representation and active participation do matter. If it is true that men tend to appoint other (mostly white) men, more women in positions of power can influence the shape of the teams and increase their diversity. EWOB record that those fifty companies led by a woman have twice as many female executives (38%) as all the other companies surveyed.

The underrepresentation of female leaders is quite evident in corporate America, as revealed by McKinsey/LeanIn.Org “Women in the Workplace” report. 1 in 4 C-suite leaders is a woman (and 1 in 20 is a woman of colour). And regarding advancements to management positions, only 87 women are promoted for every 100 men. With those numbers in mind, it does not surprise the recent positive reception of the approval of the Directive on gender quota on boards of directors by the European Parliament. It is undoubtedly a step forward. Now it is the time for appointed women’s voices to be heard and put in the condition to make a difference.

Awareness is spreading, also thanks to those high-profile interventions; yet at present and at higher levels, the situation stalls. The bank sector is symbolic in this sense. DBRS Morningstar notes: “In 2021, based on a sample of 43 European Banks, women represented 37% of board member seats. This number decreased to 26% when considering women on executive management teams. There is a lack of female CEOs and female chairs on bank boards in Europe. Only five of the 43 European Banks had a female CEO in 2021, and only four banks had a female chair of the board.”

Diversity should be a concern for employers. Because it not only influences companies’ financial performance, also helps avoid legal risks of discrimination claims. And, moreover, if diversity can drive recruitment choices, showing and practising inclusion can boost the retention of employees – a crucial element in today’s war on talent.

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