Smaller boards with more women perform better, study says | Business| Economy and finance news from a German perspective | DW | 08.03.2011
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Smaller boards with more women perform better, study says

Winning companies have winning boardrooms. A new study looks at the various attributes of high-performing boards. And guess what? Women are one of them.

Female executive gives a presentation

Women help boards perform better, the report says

Boardrooms across the globe have faced huge challenges over the past few years. Still, some have steered their companies down a successful path. How did they succeed where others have failed?

The international law firm Eversheds, which commissioned independent study into the relationship between broad composition and company performance during the recent financial crisis, believes it has the answer: smaller boards, more female directors and a higher proportion of independent directors.

The report is based on a survey of 241 companies in Europe, Asia and the United States, as well as in-depth interviews with 50 directors.

Better overall dynamics

The data shows better-performing companies had fewer board members. Boards in the sample group had between six and 32 members, with European companies having the highest number at 18.7 on average.

The benefits of smaller boards, according to the directors interviewed, include greater focus on key issues, swifter decision-making and better overall dynamics between board members.

Chancellor Angela Merkel

Chancellor Merkel is unhappy with the low number of women in boardrooms

The report also showed a positive correlation between share price performance and the number of independent directors, who bring different views and skills sets to the boardroom.

While companies that performed better also tended to have a higher percentage of female board members, only 55 percent of directors interviewed thought diversity for its own sake is beneficial to board and company outcomes. Only half that percentage was directly in favor of positive action such as quotas.

Extremely low penetration

Elke Holst, a senior researcher with the German Institute for Economic Research (DIW), said women bring innovation and creativity to company boards.

"Women often have different ideas from men," Holst told Deutsche Welle. "They can complement each other. It's all about having the right mix."

According to recent DIW research, women accounted for only 3.2 percent of executive board members at Germany's 200 largest companies in 2010.

"A quota is political and could make things happens," Holst said. "Germany has huge potential. We shouldn't wait another 100 years."

Quota advocates say Germany should follow the example set by Norway, which ruled in 2008 that women must hold at least 40 percent of board seats at the nation's top 500 companies.

More recently, France ruled that women should form at least 40 percent of supervisory boards at companies with more than 500 staff or an annual turnover exceeding 50 million euros ($68 million dollars) by 2017.

Author: John Blau
Editor: Sam Edmonds

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