Top Women Boost Bottom line

“The more women in the top-five management team, the better the firm does on a whole range of metrics,” says Ross.

[Business News]


Carol Mills, 54, was a top tier executive at Hewlett Packard when she was pulled aside by a well-meaning boss who said she was “too aggressive.”

“He told me I was scaring people,” she says.

Had she been a man there would have been no problem, Mills says her boss conceded. But as a woman, “I was outside the narrow band of acceptable behavior.” Instead of “changing” as the boss suggested, Mills quit.

The number of women in top corporate positions has plateaued since peaking at 30 percent in 2000. Mills, an expert in enterprise software, is now an unusual sight as the lone woman on a corporate board – in her case, Adobe. However her experiences are all too common in the corporate world, and experts say they may be one of the reasons for the lack of women at the top. But two recent studies show that more women at the top is good for the bottom line.

A 2007 study by Catalyst, a women’s advocacy group, found that the more women a company has on its board, the better the company does financially.

An on-going study, by Cristian Dezsö at the University of Maryland and David Ross at Columbia Business School, showed similar results but goes one step further: The number of women executives in a company is directly related to a company’s success. “The more women in the top-five management team, the better the firm does on a whole range of metrics,” says Ross. “It isn’t just the presence of women, but the style of leadership they bring to a company.

“Generally women are more democratic in their management style,” Ross says, meaning that they communicate well and are good at fostering teamwork and innovation.

After analyzing data from the top 1,500 U.S. firms from 1992 to 2006, Ross and Dezsö found “indicative evidence that female participation leads to–and is not merely a result of–better firm quality and performance.”

And while Ross and his colleagues urge caution about drawing conclusions from one study they say the good news has a twist, “We actually find that having a woman CEO has a neutral effect and sometimes a marginally negative effect on return on equity.”

The study does not look into sociological factors but one explanation, Ross said, may be that a democratic style of leadership is nullified in a position like the chief executive, which requires more autocratic tendencies.

Sexism may still play a role as well.

“Men may be accustomed to accept women as peers but may be resistant to women as superiors,” Ross said.

Given all the positive reports on women in leadership positions Ross is curious as to why the numbers of female executive hit a plateau, after sharp growth in the 1990s, especially as women and minorities are increasing in numbers in the general workforce.

The U.S. Department of Labor statistics show that minorities are 15 percent and women make up 40 percent of the work talent pool. Ross, 38, says the issue “merits investigation.”

Natalie Holder-Winfield, an employment lawyer who creates diversity programs for companies, has just published a book, “Recruiting and Retaining a Diverse Workforce,” which explains some of the barriers that may be keeping women from reaching the top.

“There is the lack of informal mentoring,” she says. Holder-Winfield, whose programs help companies identify unconscious behaviors that exclude people, says women are often left out of social networks that involve business discussions outside of the workplace.

In the long run this exclusion is a problem, Holder-Winfield says, as hiring for top positions is often done from the informal executive networks.

Attorney Toni Wolfman, 65, sits on the board of the Inter Organization Network (ION), an umbrella association for the different regional women’s advocacy groups, and concurs with Holder-Winfield. “So much of it boils down to relationships. People hire who they know,” she says.

A former partner at the law firm Foley Hoag in Boston, Wolfman says networking and mentoring is precisely what women’s advocacy groups provide female executives.
Her work is also about reaching out to people that do the hiring and it’s paying off. She says: “Now some head hunters will turn to us when they are looking for additional talent.”

Wolfman does not want to over emphasize the female management style theory and believes that sometimes studies overlook the simplest explanation for their results. “Maybe it’s because women who get to those positions have to be so much better than the guys to get there,” she says.

The conclusions that come out of studies can be detrimental to women if they don’t conform with the female leadership stereotype, Wolfman says. “Look at Hillary,” referring to the criticism that Sen. Hillary Rodham Clinton gets for her alleged aggressiveness.

As for why women still seem to hit the glass ceiling in executive offices, Wolfman believes the slowdown in hiring is because many companies are content with a form of tokenism. “Once they have hired that one woman they don’t look further,” she says.

Yet, other women in top positions, like Laurie Shahon, 56, a former Wall Street trader with her own private equity firm, don’t believe discrimination explains the paucity in females in top management. “I’ve been on the board of public companies for 20 years and frequently all of the time as the sole woman,” Shahon says. “I think a good board member is a good board member; it’s not a gender issue.”

Shahon feels that there are few women board members because there are few women running companies with the relevant experience that boards are looking for.

Additionally, in the wake of corporate accounting fraud scandals, laws like Sarbanes Oxley, which hold management more accountable, companies have become more selective in terms of whom they hire for top positions.

But asked why there are so few women executives to begin with, Shahon laughingly says, “That’s a book.”


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