Melanie Verwoerd

If you want to make money appoint more women

2018-05-16 08:01

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On Mother's Day many of the media channels ran clips of children giving their opinion on "What is a mother". Although the cute factor was sky high with all of them, it struck me how all the children fell into gender stereotypes.

They talked about the food their mothers cooked for them, the clothes they made or washed and as one little girl put it: "how she makes everything in the house look nice".

Clothes, our homes and especially the food we eat are very important and let me make it clear that I have great admiration for women who are full-time home makers.

I was just hoping that a few of the children would also refer to the work their mothers do outside of the house (as they undoubtedly would when they talked about their dads).

This reminded me of a report by the IMF entitled Gender diversity in senior positions and firm performance: Evidence from Europe.

Europe is generally regarded as very progressive in terms of gender diversity in the workplace. Despite a fairly good representation of women in the labour force, the same cannot be said for women in senior positions. In 2014 women occupied only 19% of corporate board seats and in the 600 largest companies less than 14% of the senior executive positions were filled by women. Shockingly, only 4% of CEOs were female.

This despite the fact that 16 countries in Europe have some form of legislation requiring quotas for women of around 30-40% in senior positions. (Norway was the first to legislate a 40% quota in 2003).

South Africa has done slightly better than Europe, but the picture is still not good. According to the 2017 Women in Business Report 28% of senior management positions here are filled by women. Yet, only 10% of CEOs are female and more than a third of companies have no women in senior positions. (Honestly, guys! You couldn't find a single competent woman?)

The probem is also that the figures seem to be growing very slowly. In 2004 26% of senior positions were filled by women. So there has been only a 2% increase in the last 13 years. At the level of CEO there has been only a 3% increase since 2015.

The arguments for having more women in senior positions can generally be divided into two categories. There is the moral argument, i.e. "it is the right thing to do" and/or the "it is the bright thing to do" argument.

I'm not going to argue the first point. If anyone still doesn't get why there is a moral imperative for gender equality on all levels, I doubt that they ever will.

However, the second reason, i.e. that it is the bright thing to do, is what this report from the IMF focusses on. Using a sample of more than 2 million companies across 34 European countries these researchers proved conclusively that women in senior positions make a significant difference to profit margins. In fact, they show that "replacing one man by a woman in senior management or on the corporate board is associated with 8-13 basis points higher ROAs [return on assets]".

The report also concludes that this is particularly relevant in industries with many women in the workforce (where the benefit is about 20 basis points higher ROAs) and also in knowledge intensive or high tech industries. They argue that the high tech industries demand a higher level of creativity and critical thinking which diversity in general may bring. In these industries an additional woman on the board or in senior management is associated with 30 basis points higher ROAs.

Of course, there are numerous factors that make it difficult for women to get into these positions. Gender stereotypes and prejudice, insufficient maternity provisions and old boys' networks are a few of the most frequent reasons mentioned.

Many researchers also argue that with the emphasis on B-BBEE empowerment in South Africa, gender equality often falls off the agenda. According to the IRR's South Africa Survey  there were half the number of black female directors than black male directors of JSE listed companies in 2016 – which seems to validate this argument.

The bottom line remains: If you want to improve your profits – get more women into senior positions. It seems that "leaning in" is not only important for the advancement of women's rights, but it makes good ol' financial sense.

- Melanie Verwoerd is a former ANC MP and South African Ambassador to Ireland. 

Disclaimer: News24 encourages freedom of speech and the expression of diverse views. The views of columnists published on News24 are therefore their own and do not necessarily represent the views of News24.

Read more on:    women in business  |  gender equality
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