Over the last decade the percent of women in senior management positions globally increased from 21% in 2012 to 32% in 2022.(1) While the world has seen an increase in women assuming leadership positions across the board, senior positions in large corporations are still primarily dominated by men. Despite hitting record highs, as of January 2023 only 10% of the Fortune 500 companies and 7% of S&P 500 companies are run by a woman. Yet, companies run with women at the helm tend to follow a similar trend – improved performance and rising stock prices. Here’s what we know about companies run by women and their correlating levels of performance.
Evidence Supporting Women in Leadership
Studies around the globe have shown an interesting correlation between the incorporation of women in executive leadership roles and positive performance trends.
A study reported by the Harvard Business Review, for example, concluded:
“Going from having no women in corporate leadership (the CEO, the board, and other C-suite positions) to a 30% female share is associated with a one-percentage-point increase in net margin — which translates to a 15% increase in profitability for a typical firm.”(2)
Other studies have suggested that while women CEOs on their own may not perform better or worse than their male counterparts, it’s the bringing of other women into multiple management positions that can create a positive impact on performance.
Another study conducted by S&P Global found that in the two years following their appointment, “female CEOs saw a 20% increase in stock price momentum.” Additionally, companies with more gender diversity on their executive board were more profitable than those without.
Why Does Female Leadership Lead to Better Performance?
Truthfully, there is no concrete answer to this question. There are, however, theories as to why putting women in executive positions can increase stock performance and profitability.
Theory #1: Few Women Make It To the Top
As the numbers have shown, few women make it into executive leadership and C-suite positions. Therefore, the women who do make it into these roles are often the most motivated, dedicated and hard-working in their field. They excel enough in their fields to beat the odds and outperform the competition. As a result, the women who do make it to the top are often high-performing and well-positioned to propel the company forward.
Theory #2: Diversity Brings Perspective
Women can bring a fresh and different perspective to the table. New ideas can spark positive change, which results in better performance. Opening the doors to a more diverse executive team can bring a much-needed breath of fresh air to any company’s leadership board.
Theory #3: Women Tend to Be More Careful
Simply put, men (statistically speaking) take more risk than women. Put somebody under pressure, and these gender differences amplify. One study found that men are more likely to make risky decisions under pressure, while women are less likely to do so.(3) In terms of leadership positions and profitability, this tendency may work in a woman leader’s favor.
The gender gap is still prevalent in America and other developed countries, but we expect to see the positive trend of a growing number of women in C-suite and senior management positions continue given the numerous studies that have shown the benefits of having diverse women in leadership and c-suite positions.
At Heritage we recognize that women in leadership can bring positive change to a company’s momentum and profitability. In line with our women’s initiative, HER Heritage, which we launched in 2021, we’re proud to say that women now represent half of Heritage’s Executive Management Team.
Sources:
1. Grant Thornton Women in Business report 2022: Opening the door to diverse talent
2. https://hbr.org/2016/02/study-firms-with-more-women-in-the-c-suite-are-more-profitable
3. https://journals.sagepub.com/doi/abs/10.1177/0963721411429452
