This post was co-authored and submitted to The Race to the Bottom by Anna Catalano and Nick Slavin. Ms. Catalano serves on the boards of directors of Mead Johnson Nutrition, Willis Group Holdings, Chemtura, and Kraton Polymers. Her leadership blog can be found here. Mr. Slavin wrote this when he was a corporate attorney with Skadden, Arps, Slate, Meagher & Flom LLP.
As the number of qualified women in the corporate director candidate pool grows, companies are reconsidering the business case for gender diversity on boards. The most familiar arguments involve the optical value of having a board’s members reflect the company’s diverse employees, customers, shareholders, and other stakeholders, and the strategic value of women’s diverse “perspective” in the boardroom. In recent years, however, the arguments have come into sharper focus as some commentators have made the controversial claim that women may have higher ethical standards in business than do men, and studies have more precisely articulated the benefits women can provide in the boardroom and the circumstances in which such benefits occur.
Although the causal mechanisms are difficult to pinpoint, the correlations between women directors and ethical governance are beginning to show a pattern. A 2009 study in Corporate Reputation Review found that Fortune 500 companies with higher percentages of women directors were more likely to be found on Ethisphere Magazine’s “World’s Most Ethical Companies” list. Other studies identify a correlation between women directors and higher scores on measures of corporate social responsibility. Data from the Journal of Financial Economics suggest that these positive effects might be due in part to the effects they have on the other board members, showing that a greater number of female directors is correlated with better attendance and engagement of male directors.
Recent research analyzes how boardroom dynamics change as the number of female directors increases. Kramer, Konrad, and Erkut’s (2006) Critical Mass study observes that the benefits of a gender diverse board only fully appear upon reaching a “critical mass,” or tipping point, of women directors. Their research shows that while one woman may have a potential impact in the boardroom, the presence of three or more substantially increases the magnitude of women’s influence. Reaching this threshold number gives women the support and validation they need to be the most effective directors.
In some European countries, reaching this threshold is now mandated. Required gender-based quotas for public company boards have been introduced in Norway, France, Iceland, and Spain, while countries such as Switzerland, Israel and South Africa have introduced quotas for government-owned companies. Norway’s mandated quota, introduced in 2003, called for women to comprise at least 40% of public boards by 2008. Proponents argue that Norway’s model has not adversely affected corporate valuations as some feared, and Norwegian board members interviewed about their experiences report that the markedly increased female presence has at a minimum made preparation material more comprehensive and processes more formal, both of which tend to be associated with good governance.
Solo female directors, however, remain common in the United States. Catalyst, a nonprofit organization that advocates women in business, reports that in 2005, 182 companies in the Fortune 500 had just one female director, while 53 companies still had no female representation on their boards. While strong women can make a substantial difference as solo flyers, those who serve as the lone woman director often report feelings of isolation as fellow board members may view their competence cautiously. Though two women with different styles and areas of expertise can help dispel some feelings of tokenism (particularly if their backgrounds include significant profit-and-loss and financial experience), women who serve on boards with only two female directors say they dislike being stereotyped as the “women’s contingent.” The Critical Mass study indicates that boards that follow the “rule of three” normalize women’s presence in the boardroom, where they are viewed more as contributing individuals rather than as representatives of their gender. In contrast to the Norwegian model, relatively few American companies benefit from this phenomenon: last year, just over one-fifth of companies in the Fortune 500, where average board size is over 11, had three or more women directors.
Moving boards beyond the lone token woman requires companies to see the value of a gender-diverse board, and a number of recent studies have highlighted the benefits of gender diversity. They note that women more often consider multiple stakeholders, not just stockholders, when making decisions, and have a greater connection to the complex human context of the business. According to some, women are more likely to ask tough questions and demand comprehensive answers, and their collaborative leadership style and direct manner of communication can improve board dynamics as well. The Norwegian data also support previous studies observing that boards with more women tend to be more engaged, better prepared, and more observant of formalities.
Still, the subtle and often ambiguous benefits that female directors bring continue to be debated, with many arguing that women directors are not preferable to serve on boards than similarly qualified male candidates. A 2010 study surveying 400 male and female board members of primarily American companies concluded that while 90% of female directors believed women bring unique attributes and perspectives to the boardroom, only about half of male directors shared the sentiment. The same study showed that male directors were less likely than female directors to support the SEC rule mandating an explanation of diversity’s role in board member selection (43% vs. 62%, respectively). Likewise, 25% of surveyed women supported diversity quotas and regulations, while just 1% of men reported so.
Perhaps these differences of opinion in part reflect the reality that with diversity comes potential risks: miscommunication, conflict, exclusion, and loss of camaraderie. Qualified directors must be chosen carefully and the chairman must have the ability to temper the wider range of opinions at the table with an overall sense of group cohesion.
While the benefits of gender diversity on boards remain controversial, recent research, as well as the effects of quotas in certain countries in Europe and elsewhere, have helped to articulate clearer rationales for boards adding strong female directors, at least until a “critical mass” is achieved.
 Lisa Yoon, “On Boards, Are Women the Fairer Sex?,” CFO.com, April 10, 2003. Retrieved from http://www.cfo.com/article.cfm/3009002/c_2984290/?f=archives.
 Bernardi, Richard A., Susan M. Bosco, and Veronica L. Columb, “Does Female Representation of Boards of Directors Associate with the ‘Most Ethical Companies’ List?” Corporate Reputation Review 12.3 (2009): 270-280. Business Source Complete. Web. 13 June 2012.
 Bernardi, Richard A., and Veronica H. Threadgill, “Women Directors and Corporate Social Responsibility.” Electronic Journal of Business Ethics and Organization Studies 15.2 (2010): 15-21. Retrieved from http://ejbo.jyu.fi/pdf/ejbo_vol15_no2_pages_15-21.pdf.
 Adams, Renée B., and Daniel Ferreira, “Women in the Boardroom and Their Impact on Governance and Performance.” Journal of Financial Economics 94.2 (2009): 291-309. Elsevier. Retrieved from http://personal.lse.ac.uk/FERREIRD/gender.pdf.
 Kramer, Vicki W., Alison M. Konrad, and Sumru Erkut, “Critical Mass on Corporate Boards: Why Three or More Women Enhance Governance.” Wellesley Centers for Women 11 (2006): 1-74.
 Wintrob, Suzanne, “Mandated Diversity Quotas Won’t Make Corporate Governance Any Better,” Financial Post Magazine, June 19, 2012. Retrieved from http://business.financialpost.com/2012/06/19/mandated-diversity-quotas-wont-make-%E2%80%A8corporate-board-governance-any-better/.
 Soares, Rachel, Baye Cobb, Ellen Lebow, Allyson Regis, Hannah Winsten, and Veronica Wojas, “2011 Catalyst Census: Fortune 500 Women Board Directors.” Catalyst (2011): 1-2. Retrieved from http://catalyst.org/file/533/2011_fortune_500_census_wbd.pdf.
 Kramer, Konrad, and Erkut, 30.
 Soares et al.
 Connor, Michael, “Men and Women Disagree Sharply on Governance.” Business Ethics, October 7, 2010. Retrieved from http://business-ethics.com/2010/10/07/1349-men-and-women-corporate-directors-disagree-sharply-on-diversity-and-governance/.