> Posted by Danielle Donza
As the European Union presses ahead with plans to impose quotas that would increase the proportion of women on company boards, I am reminded of a recent conference call where a participant expressed frustration with a similar investor-imposed quota that required at least two women to serve on the board of a microfinance institution. Citing a lack of qualified board members in the microfinance industry, let alone qualified female board members, he said, “I can go out and ask two of my female friends to sit on the Board but they aren’t going to contribute anything.”
This “checking the box” perspective is not only unjust; it also represents a bad business decision. Studies reveal that “firms with equal representation of women on their boards had 56 percent higher operating profit compared with companies with all-male boards.”
Women comprise 51 percent of the population, control approximately 80 percent of household spending, and yet only make up 15.7 percent of Fortune 500 boards of directors and less than 14 percent of board members for Europe’s biggest companies.
Moreover, the graph below (MicroCapital) reveals discrepancies between the percentage of female borrowers and the percentage of female loan officers, managers, and board members at MFIs.
These numbers just don’t add up to me as making good business sense.
But let’s take a deeper look at the data. Techcrunch offers further statistics and studies to support gender diversity in the board room:
Studies also show companies with gender diversity at the top drive better financial performance on multiple measures – for example, 36% better stock price growth and 46% better return on equity. And, studies show the more women, the better the results. This is likely because teams with more females demonstrate higher collective intelligence and better problem solving ability. So it’s probably not a coincidence the world’s most admired companies have more women on their boards than the average company.
Three female private equity experts in the Netherlands recently launched Karmijn Kapitaal, a private equity fund which will invest in companies led by a female CEO or with more than 30 percent of women in key decision making positions. According to these experts, companies that meet this profile 1) have proven to be better performers and consistently generate higher and steadier returns, 2) have lower bankruptcy rates, 3) have better calculated risk-taking and risk management and, 4) have employees that feel more comfortable and tend to stay longer with the company.
Should the microfinance industry care? Microfinance has traditionally targeted women and has been touted as empowering women. Given these objectives, can we realistically expect a group that primarily consists of men to provide sufficient guidance to organizations that provide financial services to a target market of women?
It doesn’t seem like a huge leap to make a business case that MFI boards might benefit from a female perspective if only to represent a greater diversity of views and experience. One particular observation is that women have traditionally been more risk-averse and it seems that many MFI boards would also benefit from this diversity of risk appetites.
There are a number of industry efforts that are working to bridge the gender gap within MFIs. The Women’s World Banking report “What if it had been Lehman Brothers and Sisters” introduces an Organizational Gender Assessment (OGA) Methodology. Mibanco’s Triple P (People, Planet, Profit) Report incorporates gender diversity as an important component of human capital development. Yet, these changes do not seem to be filtering through to the board level. The Social Performance Task Force and the MIX are syncing up to collect data around the number of women on boards, which will give us a better of picture of where the industry stands.
And, some savvy companies are actually changing the makeup of their boards of directors, teams, and lending strategies, and this is giving them better collective intelligence, more community admiration, and better financial results.
So what can each of us do personally? One, be informed – both about the statistics of how female representation improves a company’s performance and also about the organizations that are working toward the goal of increasing women’s board participation. Two, start making a list of women who are qualified to sit on the boards of microfinance institutions. This way, the next time someone complains about trying to fill such a quota, you will be ready to explain why boards benefit from gender diversity and provide a suggestion for a qualified candidate.
What do you think? Should the microfinance community be looking to utilize quotas for female board representation, or can we simply rely on good old-fashioned business sense to right the numbers?
Have you read?
Which Comes First: the Equal Woman or the Woman Entrepreneur?
The Girl Effect – Some Organizations to Watch