Keeping Women Out of Leadership Positions is Simply Bad Business

It’s pretty simple.

Even before the recent national reckoning on sexual harassment in the workplace and the #MeToo movement, countless studies, and just plain common sense, have told us that when women lead, good things happen: ideas flourish, workplace culture is more diverse, and investor confidence gets a boost.

And, apparently, so does the bottom line.

As companies increasingly self-examine their corporate cultures, the case for increased gender diversity in leadership is more than just an ethical dilemma. It’s also correlated with higher share price, profitability, and lower retention costs. Companies with a higher percentage of women in executive positions have a 34 percent higher total return to shareholders than those that do not, according to Catalyst.

Meanwhile MSCI Inc. studied the financial performance of US companies from 2011-2016 and found that those with at least three women on the board had median gains in return on equity 11 percent higher, and earnings per share 45 percent higher than companies with no women directors.

Sheryl Sandberg, the chief operating officer at Facebook, says the effects of gender diversity in company culture eventually trickle down to the consumer level, and yet serious challenges including workplace perception and wage discrepancy remain.

“Every woman I know, particularly the senior ones, has been called too aggressive at work,” Sandberg told the Guardian in 2014. “We know in gender blind studies that men are more aggressive in their offices than women. We know that. Yet we’re busy telling all the women that they’re too aggressive. That’s the issue. We are building products that people with very diverse backgrounds use, and I think we all want our company makeup to reflect the makeup of the people who use our products.”

Natasha Thapar-Olmos, assistant psychology professor with the online clinical psychology program from Pepperdine University, says that when women see a lack of representation or feel they are being cheated out of fair pay, they don’t feel valued at work, inevitably compromising their performance.

And that hurts the corporate bottom line.

“Whether it’s conscious or unconscious, having so few women as the head of fortune 500 companies sends the message that women aren’t successful here,” Thapar-Olmos said. “Companies are concerned with reputational risk. If investors lose faith in you, they can take your value down.”

Infographic created by Psychology@Pepperdine, the online clinical psychology program from Pepperdine University

In other words, business leaders and companies are incentivized to do more about wage gaps and discrimination in order to make women feel valued at work and subsequently stay at work and rise in the ranks. The benefits of women leadership, experts say, are tangible for a company’s financial health. Diversifying leadership and paying women an equal wage is simply better for employees and company performance.

“Having diversity around the table leads to more ideas, helping to narrow down on the best ideas and solutions,” Thapar-Olmos said.

Diverse minds along with varied experiences and backgrounds can benefit the bottom line and yet pay gaps and representation are still major hurdles for women in the workplace.

The American Association of University Women says that, almost a century after earning the right to vote, women continue to make an average of 79 cents on the dollar compared to their male counterparts — a gap that is magnified for black and Latina women.

Infographic created by Psychology@Pepperdine, the online clinical psychology program from Pepperdine University

Inspiring the next generation of women leaders will require closing the pay and representation gap. And with more women leading companies and being visible in prominent roles, future female leaders will be confident to enter a workforce that embraces female leaders and understands their contribution to the corporate bottom line. Today’s leaders need to lead by example and make their voices heard when it comes to policy changes.

Breaking through the proverbial glass ceiling in a meaningful way will take more than just one sweeping policy change or a transformation of our rhetoric. It will take a nation of #MeToo and a legion of women leaders and their advocates to make the powers that be recognize that the corporate bottom line depends on empowering women leaders.

Colleen O’Day is a Marketing Manager and supports community outreach for 2U Inc.’s social work, mental health, and speech pathology programs. Find her on Twitter @ColleenMODay.