Women in Power: exploring the positive influence of women on boards of directors

Professor Sheila Ellwood, Professor of Financial Reporting at the University of Bristol, outlines her research on the influence of presence and position of women on the boards of directors of NHS Foundation Trusts.

Professor Sheila Ellwood, Professor of Financial Reporting, University of Bristol.

Across the UK and more widely, there are moves to increase the number of women on boards. Some countries have quotas, such as Norway, Spain and Iceland. Some countries require companies to “comply or explain”, as in the UK, Denmark and Sweden. Other measures are less explicit. The rationale is largely to improve female representation and increase board diversity in public and private sector corporate governance.

Along with Javier Garcia-Lacalle, a colleague from the Universidad Zaragoza in Spain, I undertook a study to look at the impact of greater female representation. We examined the influence of women on the boards of directors of NHS Foundation Trusts in England, and the resulting implications.

How does the position of women and high levels of gender diversity on boards of directors affect organisational performance when social performance is paramount?

We found that once a critical mass of women in decision-making positions on boards has been reached, there is little further effect on performance. A high female presence among executive and non-executive directorships does not result in significant differences either in financial goals or service quality. There is no effect on financial performance; positive or detrimental.

Equally, evidence suggests that female presence on boards positively affects corporate social performance[1]. Women are considered more socially oriented than men, resulting in more effective board decision-making, particularly on aspects related to social responsibility.

However, we found that in order for female presence to be effective, women need to be in the most prominent position on boards: Chief Executive or Chair. This is particularly important if boards are to achieve corporate social objectives.

So how can this be applied more widely?

NHS Foundation Trusts provide a public service where provision of safe, effective health care is the primary objective (‘social goals’), but financial targets must be met. They have boards of directors that operate under similar corporate governance arrangements to their private sector counterparts.

However, unlike FTSE 350 firms, all foundation trust boards have a female board member, and on average over a third of directors are female. Across the trusts, 29% of Chairs and 36% of Chief Executives are female.

NHS Foundation Trusts therefore provide an excellent scenario to advance our knowledge of gender diversity on boards. As our study is one of very few to research boards with a substantial female presence, the policy implications for sectors with fewer women in senior board positions are significant.

Quality and Quantity?

Studying a sector where a third of board members are female has profound implications for the policy arguments for gender parity in corporate governance. Unlike in the private sector, women on NHS foundation trust boards are more likely to be executive directors than non-executive directors.

We found that once a critical mass of female board members in the sector is reached, there is little discernible effect of women on board performance. Thus once there is a substantial female presence, there may be little further effect on performance of increasing the number of women on boards.

However, there are representational and opportunity reasons for requiring more women on boards. Having female board members also increases the probability of greater gender diversity on boards.

Moreover, as our research shows, positions count. In the NHS Foundation Trusts, the proportion of female executive and non-executive directors does not significantly affect clinical negligence costs, but female presence in the two most influential board posts, Chair and Chief Executive, does make a difference.

As outlined previously, in order for female presence to be most effective, women need to be the boss.

 

[1] Manner 2010; Boulouta 2013; Hafsi and Turgut 2013, cited in The Influence of Presence and Position of Women on the Boards of Directors: The Case of NHS Foundation Trusts, (Ellwood & Garcia-Lacalle, 2015)

http://research-information.bristol.ac.uk/en/publications/the-influence-of-presence-and-position-of-women-on-the-boards-of-directors(684395b3-2e75-435d-98fc-15b098611357).html 

Share on FacebookTweet about this on TwitterShare on LinkedInEmail this to someonePrint this page