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The Best Reason Yet To Increase Women In Business Leadership

Written by: Victor Lipman

You can make all kinds of emotional arguments about the need to increase women in business leadership. I just came across the most compelling logical argument.

It’s a new, large global study that shows a strong link between “the presence of women in corporate leadership positions” and positive “firm performance.”

Released earlier this month, the study is called “Is Gender Diversity Profitable? Evidence from a Global Survey.” The survey, which analyzed 21,980 firms in 91 countries, was conducted by the Peterson Institute for International Economics, aWashington-based think tank. The study’s authors are Marcus Noland, Tyler Moran and Barbara Kotschwar; financial support for the study came from Ernst & Young.

It’s 35 pages of fascinating if rather dense reading. At the heart of it, however, is the basic core notion of the “positive correlation between the proportion of women in corporate leadership and firm profitability.”

Whether that increased profitability results from the quality of female leadership, the benefits that accrue from more diverse thinking, or other factors, isn’t clear. What is clear, however, is a statistical link.  The report notes that the link could reflect, “the existence of discrimination against women executives (which gives nondiscriminating firms an edge) or the fact that the presence of women contributes to skill diversity (to the benefit of the firm).”

The report also makes an important point about the value of an organic “pipeline” of female managers throughout an organization, as opposed to simply installing a female CEO at the top. “The largest gains [in company performance] are for the proportion of female executives, followed by the proportion of female board members; the presence of females CEOs has no noticeable effect on firm performance. This pattern underscores the importance of creating a pipeline of female managers and not simply getting lone women to the top.”

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