It’s all about what you do – from gender equality to strategic benefits

Most international surveys rank the Scandinavian countries among the very best in terms of women and men’s equality. At the World Economic Forum are all the Nordic countries among the top 10 and the independent NGO, Women Watch the small group of countries in northern Europe is also among the very best. So there is little doubt that there is something at the Scandinavian approach to gender equality, which rings true.

Although we are close to being world champions in the equality discipline it has not been something we have been particularly good at exploiting in a commercial sense. Instead we have resorted to toasts and speeches and we highlighting the individual women who have actually been able to beat their way through the glass ceiling.

In Denmark we have come up with initiatives such as charter for more women in management which is a set of principles like the Global Compact that is meant as tool for strategic gender equality development within originations or the torch campaign were individual companies communicate how they work with equality within their organization. While these initiatives are very fine they have the drawback that they simply perpetuate women and femininity as a handicap.

It is not because equality is not a real problem and that for many women means that being thirty is also de-facto means the end of their professional career in management. I just think that if we continue to regard the female gender as a handicap, we will never move beyond the challenges that both the country, but more specifically the individual companies are facing in terms of organizational development and continued competitiveness. A novel approach towards gender equality that has not exactly been dominant in the current debate neither here in Scandinavia nor to my knowledge anywhere else in the world.

Companies in charge know how to use sex

Men and women are in many ways different and in many cases, the direct opposites, like Mars and Venus, if I had to take a familiar example. Yet we are out unable to function without dealing each other’s good and sometimes bad sides.

Take, for example the trait of being entrepreneurial and the willingness to assume risk. Here is one of the traits that we perceive as being masculine and it is something we as a society appreciate. It turns out also that around. 2.5 times more men are entrepreneurs than women. Of course there are also female entrepreneurs and we are lucky to have them, yet it is a trait we usually put in connection with being a man.

As a counterweight to the enterprising men we see the risk averse women. The ability to understand and devise strategies to avoid risk is something we associate with feminine traits. It would be wrong to say that men can’t be risk averse but as we traditionally have favored the risk-taking in men and given credit to women who understand and is able to avoid risk it is the traits we see now as being most prominent. Remember that I do not judge if these traits are good or bad if they have come from the creation of stereotypes or if it is something in our genes, but only look at how people actual act.

There are many companies that have discovered that women are good in the role of risk monitors. Thus, more than 45% of audit committees in the Swedish OMX companies of women, which is in contrast to that is somewhere between 10 to 20% women on boards in general. It turns out also to companies with a gender-differentiated Board of Directors and generally cope better with the crisis at least the first one in 2008. These organizations have been able to respond quickly and consistently to market changes and have implemented the changes needed to make money in a difficult market. Examples include the Swedish Hennes & Mauritz (clothing and fashion), or the Danish firms Carlsberg (beer and soda) and D/S Norden (shipping), who all have women in both the Board and executive management. All three companies have fared well through the crisis and although it has been difficult, they have been able to exercise constant care in very troubled waters.

I’m not sure that these businesses have completely understood the significance that gender has had on their ability to adapt to its environment in an efficient manner, but in any event, it worked.

The patriarchal business is stalled

In contrast stand the less diversified firms, or said in another way, those who either did not want or have failed to attract other than male employees into their strategic management group. These companies have not been able to get rid of their risk as the market they operated in changed. This can obviously be due to many factors, but the interesting thing is that they generally perform worse than their more diversified counterparts. As a consequence of their inability to understand the organizational risks that they faced, they have not been able to show a sufficient earning capacity or have had direct losses. Both of which have been penalized by the stock markets to a degree where some of theses companies are valued less in terms of market price than the value it has according to its books.

An example of a company that has a high organizational risk seen with a gender perspective is firm Vestas. Time after time, Vestas has disappointed the market mainly because they have not had a good feel for what their stakeholders wanted to know and therefore could not live up to expectations that primarily professional market analysts and portfolio managers had. As a consequence, we have seen share prices today are at the bottom even when compared to its tangible value. As I have blogged about Vestas before there is no doubt that they have a good product, excellent production and are market leaders so there is no reason why there share price should not be much higher than it is today.

Two typical strategic moves that male-dominated companies have been using are first, to try to save themselves out of trouble by cutting costs; secondly to dismiss its leaders. It is not because this is a particularly patriarchal features that organizations use in times of recession, but the strategies only aims to reduce costs and simultaneously makes them unable to think further ahead, the whole exercise ends up in an actual fight for survival. To use an analogy it is like beating the body into submission and when that does not bring results we cut of the head. Not that some companies do have a lot of fat which can be trimmed but if there is no strategic thinking behind the cost reduction it will mount to little less than the ultimate loss of the business.

Everything else being equal, companies that have come through the crisis by adapting to and cultivating new markets perform better than those who are just coming through to save and reduce their organizations as the only means of maintaining a solid balance sheet.

The Scandinavian competitive advantage

Both here in Denmark but also in particular the rest of the countries were gender equality is high we have a resource that is not only unique but also virtually impossible to copy. By using our human resources to its full potential, we can provide competitive advantages in both the short and long term that will enable companies to navigate more safely and with less risk on the global market.

Universities and business schools produce far more women than male candidates. If business continues to let this resource remain unused and under utilized, we must compete on parameters where do not have many chances such as production costs and human and labour rights areas were we are unable or unwilling to compete.

Today there are already well-developed tools that can contribute to positive gender development in private and public organisations. The question is whether the HR departments, executives and board members are willing and have the courage to embark on an organizational debate about strategic consequences that extend far beyond the words and cheers and speeches in for example Charter for more women in leadership, Torch and other kinds of woman leader priced which reduces the debates to centre around gender quotas or not.

As individual and members of organisations we have to come to terms with the fact that women and men bring different approaches, viewpoints and perspectives to organizational development. And that these differences can be utilised strategically by organisations that know how. Through an understanding the differences that gender contribute with, we will be able to attract and retain skilled employees and thus be able to reap the benefits found in the fact organisations consist of people that think and behave differently. Female and male employees contribute, for better and for worse, to the development of companies and that the sexless organisation does not exist and that it is better to work to exploit these differences rather than ignoring them.

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Are women in senior management and board position positively associated with higher than average economic performance?

Evaluating financial performance in relation to gender can be a tricky task. Not only is there numerous ways that a researcher can decide what good performance means but even when we are comparing apples with apples we get into trouble when we try to say something in general about the data.

So what I’m trying to say is that the choices that I have made in-order to investigate gender and financial performance might differ from what you might choose as the best indicator.

The methodology of the article is fairly simple I have looked at corporate Boards and Executive management in the Danish and Swedish most traded companies 40 companies in total. From a statistical analysis, which I will not go into detail, here have I separate the companies into three groups Low diversity, Medium diversity and High diversity relative to the country. This meant that I could produce this chart of high and low diversification among the top management and board members. F.eks. as a highly diversified company in Sweden one which have more than two women on the board and more than two women in top management, while the diversification is a little different in Danish companies. The reason for the difference between countries is mainly due to different legislation and cultures related to gender.

Organisational level Highly diversity Low diversity
SE Boards >2 <2
SE Top Management >2 <1
DK Boards >1 <1
DK Top Management >1 =0 

Together, these two measurements of corporate performance will give an indication on how companies perform with different approaches to gender composition. The data is comprised of two indicators for each country one on EBIT and one on. This gives an indication of how well the companies are able to achieve a profit and earnings per share issued in relation to gender diversity and compared with an overall average.

The EBIT analysis shows that companies with low diversity in their boards and top management have a lower than average ability to produces a profit over the period. While companies with a more diversified leadership team will do better. However, gendered companies have lower or very close to average EBIT performance on the short term e.g. 2006 for Swedish and 2005 and 2006 for Danish companies. In the last period which coincides with the financial crisis and recession gender diversified companies do significantly better when it come to earnings.

When it comes to the companies’ ability to show performance in relation to shareholders the picture is somewhat different. Companies in Sweden considered as low diversified are doing better than average on the long term (e.g. 2008) and even out-performing the diversified companies. In Denmark both high and low diversified companies are able to show and EPS, which is consistent with or a little better than the average. Here the highly diversified companies are able to show earnings which are little better than the low diversified.

Companies that stand out in Sweden are Hennes & Mauritz (H&M)[1] in Sweden that shown a consistent increase in performance since 2004 (EBIT show a consistent raise to 1.93 in 2008) and who has four women in both the board and in top management. H&M women accounts for 40 % of the total board members making it one of the highest performing companies in the survey both in terms of EBIT and gender mix. Also in terms of EPS is H&M among the highest performers having more than doubled its earnings per share in the period to 2.1 compared to 2004. Among the low diversified is Scania[2] doing almost as good as H&M while Assa Abloy[3] more than halved its EBIT in 2008 compared to the 2004 results to 0.4. In terms of EPS Scania was again the best performer at 2.06 while Tele2 was doing worse than in 2004 consistently over the period and was at 0.89 in 2008.

In Denmark several of the highly diversified companies have more than doubled their EBIT (Carlsberg, D/S Norden and Rockwool)[4] but there are also several companies that have lost terrain such as Danisco[5] who lost over 40% to 0.59. Among the low diversified is DSV[6] the best performer at index 1.43 while Lundbeck[7] is the worst performing at index 0.92. Several of highly diversified companies have an EPS around index 2.0 and above (Carlsberg, D/S Norden, Roskwool and Sydbank). Most of the companies among the low diversified have increased their EPS in the range of 1.3 to 2.24 in the period.

These results can be interpreted in relation to a stereotypical understanding or the traits of men and women. When analysing the results of the highly diversified companies they can be explain using the trait of adaptability and being risk averse (Cadsby & Maynes, 2007, Daruvala, 2007). As the market leading up to the financial crisis changed rapidly and new opportunities arose were companies that were willing to adapt their business model to these changes were also able to harvest new opportunities. Hereby they could increase their earnings rapidly and produce above average EBIT results in 2007. When the crisis started in the mid 2008 the ability to adapt to changes in the business environment again became a competitive parameter. Businesses could use the trait of adaptability and use it in dampening the impact of the rapid decrease of trade on the global market place. At the same time have more gender diverse companies have been accepting less risk in their financial transaction and thereby experienced fewer losses. Companies that was receptive to changes in the market could thereby react effective and utilise opportunities before their competitors. The same companies were also able to use their knowledge to assess the risks that they were exposed to more efficiently and take action in time to reduce their loses when the market changed. The combination of being adaptable and risk averse help companies that are willing to embrace these characteristics, as they become highly competitive and able to react to changes in the marketplace.

Like the feminine traits can explain the results of the highly diversified companies (during the financial crisis) the same approach can be used in understanding the results of the low diversified companies. Male stereotypical behaviour prescribes that men are more likely to demonstrate traits that are associated with informalism and paternalism which in-turn create more rigid forms of organisations (Maddock & Parkin, 1993). This means that male dominated companies would be slower to react to changes in the environment, and they will be less likely to have connections with more distant stakeholders. A strong connection to a mentor can reaffirm that changes in the market should not be taken notice of because the mentor himself does not understand the significance of the change. The changes in EBIT among the low diversified companies are inline with this perspective as they missed the opportunities that arise in the market and were slower to adopt their business model resulting in lower than average performance.

Gender arguments can also be used to explain the changes in EPS. Companies that have a higher proportion of women have fewer tendencies to focus on shareholders as the only stakeholder than male dominated boards and top management. Women will be more likely to incorporate more distant stakeholder into the business decision process because of the trait of being collective thinking. This trait favours the company overall survival and wellbeing rather than keeping one stakeholder content, e.g. shareholder. Collective thinking favour long-term sustainability of the corporation rather than dealing with the immediate crisis and relying on keeping the shareholders content. In highly diversified companies shareholders are being cared for when earnings are high, but when the crisis hits the focus is on the company and its long-term survival and the EPS is reduced dramatically. Keeping in mind that the EBIT was considerable higher among highly diversified companies the results can be interpreted as these companies less diversified organisations are consolidating and focusing on retaining enough liquidity to maintain the level of EPS. In times where businesses have to change in order to maintain profitability the masculine trait of entrepreneurialism becomes valuable. Being able and willing to take risk is what traditionally have been the characteristics that have differentiated companies and the same applies here. However, the situation that companies is facing can be made worse if management and board is unable to evaluate the risk that they are taking and more or less guessing what the future will bring. This could be an ok situation if everybody did the same and nobody had a clear advantage thereby creating a situation where there was no clear advantage to anyone. However, a higher degree of stakeholder engagement will facilitate an improvement in quality decision-making and thereby an improved risk calculation. This means that companies that are able to display feminine traits have a clear advantage compared to companies who have to rely on their ability to guess and take risks, which might or might not pay off.

The concept of Engendered CSR

The debate between different schools of thought on what gender really is has been fought for several decades (Blau & Ferber, 1986, Rosener, 1990, McCabe, 2006, Yukl, 2010:468f). Within research there are different opinions on how the behaviour of men and women should be interpreted and explained. Are gender traits to be understood to differences in biology e.g. sex or is it something that we as a society have formulated as part of some grand discourse or is it a mixture of many different contributing factors (Giddens, 1989:158, Hearn, 1998). When mapping the terrain of gender research there are several path one can take. Some researchers have shown that behaviour between primates has similarities with how human behave or the behavioural patterns are closely linked to the biological sex. In this understanding we are as humans biological predisposed for certain kinds of behaviour, which unconsciously directs us (Blau & Ferber, 1986:16f). But these arguments do not provide a framework for how to explain the behavioural patterns of homosexuals, who in many ways display behaviour which is opposed to the biological sex or leave room for social interaction that contradicts the norms contributed to the individual sex (Hearn, 1998).

While there is no doubt that there are biological differences between men and women, the reduction of traits to mere biology does not confront some of the more complex issues that organisations are faced with such as male/female adaption to change or their ability to be receptive to the signals coming from the organisations environment. The idea that the social interaction between primates and that between humans should be equivalent could seem like a long stretch, but the ideas is far from foreign in the argumentation for or against equal rights and opportunities today (Yukl, 2010:470). The biological sex perspective becomes apparent and relevant when discussing pregnancy and maternity leave in relation to career advancement or when referring to some jobs being to “though” for women to handle.

Another perspective that research has chosen to deal with gender differences is by ignoring a gender impact all together. This school of thought is especially widespread within economic theory where gender is by most schools believed to have no impact or is just ignored all together (Lorenzen, et al, 2004, Douma & Schreuder, 2004). This so-called rational approach is by far the most widespread in the business community as it reduces the complexity that a gender approach brings to understanding organisational behaviour (Blau & Ferber, 1986:3ff). However, even with this in mind the statement by Gary Powel (1990) that “Success in today’s highly competitive marketplace calls for organizations to make best use of the talent available to them. To do this, they need to identify, develop, encourage, and promote the most effective managers, regardless of sex.” is true for whatever perception one subscribes to. The ability and willingness to organise in ways that utilize the resources that are available to its full potential is nothing new in business. But realising that a gender approach could free up unrealised resources and bring new perspectives is not something which business has worked with.

The concept of Engendered CSR have been used from time to time when it comes to looking at how gender and CSR could potentially be combined in an effort to bring gender to the CSR debate. In my mind gender should play a central role in any organisations work or at least it should be integrated into the corporate strategy at a significant high level.

An engendered CSR approach would imply that business, associates gender with the performance and positive behaviour that feminine and masculine traits bring to the organisation. This means that I believe that gender do play a part in how business perform and that managers and boards can actively influence their organisational results by adopting a strategic gender approach. In essence a business case for engendering the organisation needs to be established which managers can relate to, and perceive as useful to their organisations development. This would mean that instead of adopting a rights and moral argument for working with men and women, organisations would take a strategic approach with business needs at its core. This is at least to me the central theme in the concept when combining gender research and practice with CSR.

Engendered CSR is subsequently understood as a way of thinking about the organisation as made up of men and women that in different ways bring positive and negative behaviour to the organisation and its interaction with its stakeholders, and by working strategically with these different traits organisations can influence their overall performance.

The strategic business areas that according to my own and research done by others and were gender plays a significant part or could play a central role in organisational development are.

  • Governance especially within auditing and assurance work
  • Quality recruitment
  • Positive relations with Civil Society and other stakeholder agents
  • Productivity
  • Staff turnover
  • Fraud reduction
  • Innovation
  • Supply chain management
  • Development of new markets and products
  • Financial performance
  • Stakeholder engagement

This is far from a complete list but is the areas, which are supported by some research. There is still some way to go before we can show causality between gender and these central performance areas but there is reason to think that such a link exists.

If you think that this area should be explored further and/or have ideas on research or business practice which could be used then put a comment.

Dynamic CSR Reporting the future of stakeholder engagement – Introducing the CSR Sustainability Index

Here is an idea… What if we reported on the ability of organisations as a Corporate Citizen Live? Corporations are already evaluated on a minute-by-minute basis through the stock market so why not transfer this basic idea to the realm of CSR and Sustainability.

The idea would be to have a series of indicators on which a corporation can be evaluated through social media and other ways of interacting with their stakeholders. Some areas would have a lot of activity while others would only be changed on a weekly or monthly basis. Just like volatility on the stock market which looks at how much a certain stock is traded the indicator for sustainability would only change when somebody evaluate or leaves a comment.

Like the Flameindex that looks at poor or critical media coverage the CSR Sustainability index would look into how certain companies did on a overall sustainability agenda. But it would incorporate an extra layer which would cover the individual areas of some of the well knows measurements of sustainability and governance.

My suggestion would be to monitor individual companies on several social media channels, coupled with the company’s own PR communication, NGO reporting, College and University Students reports analysis and professional analysts evaluation of corporate performance. The idea is to cover as many of the organisational stakeholders as possible while at the same time creating an easy point of access for further analysis and investigation.

For example, if a Professional analyst raises a red flag in the area of governance in a company a further investigation by other stakeholders might uncover problems in the area of labour law and corruption within the same company. The problem area would not have been uncovered if there had not been a red flag warning in the first place in a area normally not covered in conventional sustainability reporting.

On the other hand if a company had a best practice on how to combat child labour in their supply chain this knowledge could be flagged and other organisations could learn and adapt this knowledge to their own operational practices.

The platform would of cause be web-based providing live data on the largest companies in the world who are also the most exposed to global sustainability issues. Using the Global Compact as a starting point it would be the ten guiding principles that would form the basis of the index.

Human Rights

Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights.

Principle 2: make sure that they are not complicit in human rights abuses.

(These principles could be monitored through tapping into local/global news channels were the company is active, monitoring local NGO activity, Whistleblowing on social media and own corporate reporting.)

Labour

Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining;

Principle 4: the elimination of all forms of forced and compulsory labour;

Principle 5: the effective abolition of child labour; and

Principle 6: the elimination of discrimination in respect of employment and occupation.

(Labour unions could be provided with an excellent channel for reporting abuses they cant communicate through the corporate pipeline but would like to have attention on. The CSR Sustainability index would provide an up to date indicator on how the company performed right now so that action can be taken in order to remedy the issue. Under normal circumstances it could take weeks, months or even years before an issue makes the media. But though the index it would be possible to raise awareness a lot faster just because it is linked to so many other channels of communication and organised in a way that makes it possible to get a fast overview of issues of concern.)

Environment

Principle 7: Businesses should support a precautionary approach to environmental challenges;

Principle 8: undertake initiatives to promote greater environmental responsibility; and

Principle 9: encourage the development and diffusion of environmentally friendly technologies.

(Environmental reporting has been around for many years and there are several channels, which can provide information on corporate environmental performance. There is of cause the organisations own reporting, which will be important, but this information should be seen in the light of what NGO say, municipalities, news channels and whistleblowers have to say. This would create a reasonable way of evaluating a company environmental impact and if that how this measures up against the expectations of its stakeholders. In many cases we tend to look upon environmental issues disconnected from the specific industry meaning that we look upon the carbon emissions of a clothing manufacturing company measure up against a producer of computer components, but who says that this is a important factor for the stakeholders? So, the reporting should of cause reflect the expectations of the people who have the most interest in the performance of the organisation and not some universal agreed standard that tells one close to nothing.)

Anti-Corruption

Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery.

(One of the least transparent areas of the Global Compact and the one in my mind with the most potential. While the issue of corruption is less salient in the developed world it is a problem that affects all companies who work in an international context. The problems that corporations faced are backed by the resent publish annual report by transparency international that documents the impact of corrupt behaviour. As Huguette Labelle, Chair of Transparency International states, “During 2010 we continued to see the terrible cost of corruption. Sixty-four million more people were pushed into poverty since the financial crisis struck, according to the World Bank. Such tragedies make us ever more resolved to make a difference through our work.”. But as we all know these things are interconnected and one cannot look upon corruption without also taking into account, at least at some level, human and labour rights, environmental issues and not least education and gender. So the complexity of anti-corruption is difficult to comprehend and get a real overview of without some kind of systematic approach with the CSR sustainability Index such a platform would be provided at least in the form of information that can feed more in-depth investigations.

A think a unifying approach is appealing as I for one have a difficult time finding out what is PR, Spin and lobbyism from all the channels out there wanting my attention. I think it would also be appealing as It would provide a more “true” picture of who is really the leaders on the “goodness” market and how is just good at talking about how good they are. How would not be voted the best when some of your worst critics is on the voting panel?

Does Gender matter in SRI

How does the gender of board and executive management influence the strategic decissions that is takeing in a company? According to my own research there are is a gender impact on some of the key financial parameters such us Operating profit (EBIT) and Earnings per Share (EPS).

Financial indicators are by most companies considered to be the most important  indication of how well or bad the company is doing overall, regardless of any CSR programs it might have.  In relation to EBIT results show that  companies with above average diversification on board and executive management do considerable better than the ones that have not embraced this form of diversity. While the variations when it comes to EPS the results are less salient but there is a impact which investors can consider as a screening indicator. 

These differences in economic performance can be explained using a framework of gender behaviour and traits. When it comes to the traits which influence financial performance, I argue, that women’s tendency to be more adaptable and risk averse influence the organisations that they are part of and helped positively in their financial decision making process. While men’s traits, especially during the financial crisis and subsequent downturn in 2008, are perceived as being rigid in their business approach. Coupled with a willingness to take on more risk without changing their business model have damaged the male dominated companies’ ability to create positive financial results for their organisations in times when a new approach was needed.

However, when it comes to EPS male dominated companies are able to do just as good as their more diversified counterparts. I contribute this to the male trait of entrepreneurialism which favours finding new ways to reduce costs in order for the company to be able to maintain a high level of shareholder returns. While diversified companies are able to maintain their level of EPS without these drastic moves because they were able to anticipate and make the necessary adjustments in time.

In the News

Anja Nordlund from CSR Gender Group got interviewed for the Swedish business magazine Passion for Business. She comments on how working strategically with diversity can strengthen business performance especially within the field of CSR and specifically in relation to effective risk management. You can read the article here.

Toy can read more about the CSR Gender Group at this link.