2013-04-02

Co.Exist

Women Have Better Decision-Making Abilities Than Men, Make Better Corporate Leaders

It might be the most fool-proof argument for ending the disparity between men and women in the boardroom: A new study finds that women just might run a company better.

Do you think women make better decisions than men? Let us know in the comment section below.

It’s never a good idea to make generalizations about the differences between men and women. But when there’s real data to back these generalizations up, it’s worth paying attention. Take a new study from McMaster University, which found that women tend to be better corporate leaders because of their decision-making abilities. Women, take note: regardless of whether you subscribe to Sheryl Sandberg’s "Lean In" philosophy, this study indicates that your innate abilities make you well suited for corporate power.

The study, published in the International Journal of Business Governance and Ethics, surveyed 600 board directors (75% of them were male) and found some striking differences between the way men and women make decisions in corporate settings: the men opted to make decisions based on tradition, rules, and regulations, while the women tended to shirk tradition, consider the interests of all stakeholders, cooperate, and be more inquisitive.

From the McMaster press release:

Arguments for gender equality, quotas and legislation have done little to increase female representation in the boardroom, despite evidence showing that their presence has been linked to better organizational performance, higher rates of return, more effective risk management and even lower rates of bankruptcy. Bart’s and McQueen’s finding that women’s higher quality decision-making ability makes them more effective than their male counterparts gives boards a method to deal with the multifaceted social issues and concerns currently confronting corporations.

Numerous studies over the years have provided evidence that women deserve to be board directors. One 2007 study found that boards with significant representation of women have a 66% higher return on invested capital, 53% higher return on equity, and a 42% higher return on sales compared to boards with more men. Another 2009 study discovered that having a female board director slashes a company’s bankruptcy risk by 20%.

Other studies have shown that women can yield superior results in other areas of business as well. We recently reported on a study from financial services firm Rothstein Kass showing that female hedge fund managers outperform their male counterparts--by a lot.

And yet, women make up just 9% of corporate board membership globally. In the alternative investment space, women say that there is little motivation to stay in the sector, and in any case, there aren’t enough available positions in what they call an "'old boys’ club." Something needs to change.

Do you think women make better decisions than men? Let us know in the comment section below.

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53 Comments

  • markgrimm

    Imagine if the headline had been reversed, that men are better decision makers than women? There would be calls for boycotts and resignations.. This is a silly article because so many factors are in play for determining success.

  • Brian S.

    It's juvenile and petty to distribute nonsense like this. Studies like this one are flawed from the outset because there are so many variables that contribute to effective leadership and organizational success. Humans nature is complex and does not lend itself to narrow scrutiny.

    So the author has only hurt the cause by inflaming divisiveness. Women (in general) have certain leadership strengths that men (in general lack). Men (in general) have certain leadership strengths that women (in general) lack. And yet there are many individuals who defy these generalizations. We need both men and women in leadership roles. And we need leaders who are secure and courageous enough to create opportunities for women and men without filtering their perceptions through a strict gender lens.

    Does this excuse a tradition of gender bias by males in the workplace? Of course not. Let's work constructively to remedy that. But if you try to swing the pendulum too far in women's favor (not equal opportunity but FAVOR), you'll spawn a backlash that pulls the pendulum too far back in the other direction. Our companies and our nation cannot tolerate this zero-sum, divisive mindset. 

  • Amy Anderson

    Yeah, I suppose it's kind of like how all those dumb, uppity women are always denying all that high quality research that claims that they're innately deficient at math and abstract thought.

  • Amy Anderson

    I looked at the actual study from the journal and it is a textbook case of confirmation bias, selection bias, and confusing correlation with causation. It's just bad.

    Confirmation bias, because they only mention research that supports their position, and neglect to discuss several recent meta-analysis that control for statistical anomalies which do not find a relationship between having women on boards and increased corporate performance (sometimes finding negative correlations, as was the case in Norway). Older studies that did show a positive relationship were correlational and upon investigation it was discovered  that more successful companies put more women on boards, not that women on the boards make the company more successful.

    Prof. Susan Vinnecombe, whose study was cited in this research, has retracted the opinion and recently stated:

    “…there has been quite a push in the past – indeed, we ourselves have engaged in such research – to look at the relationship between having women on corporate boards and financial performance. We do not subscribe to this research. We have shared it with chairmen and they do not think that it makes sense. We agree that it does not make sense. You cannot correlate two or three women on a massive corporate board with a return on investment, return on equity, turnover or profits.. We have dropped such research in the past five years and I am pleased to say that Catalyst, which claims to have done a ground-breaking study on this in the US, officially dropped this line of argument last September.”

    See the following:

    Adams, R. B., & Ferreira, D. (2009). Women in the boardroom and their impact on governance and performance. Journal of Financial Economics, 94, 291-309. doi:10.1016/j.jfineco.2008.10.007

    Antonakis, J., Bendahan, S., Jacquart, P., & Lalive, R. (2010). On making causal claims: A review and recommendations. The Leadership Quarterly, 21, 1086-1120. doi:10.1016/j.leaqua.2010.10.010

    O’Reilly, C. A., III, & Main, B. G. M. (2012). Women in the boardroom: Symbols or substance? Research Paper No. 2098, Stanford Graduate School of Business. http://gsbapps.stanford.edu/re....

    Ahern, K., & Dittmar, A. (2012). The changing of the boards: The impact on firm valuation of mandated female board representation. The Quarterly Journal of Economics, 127, 137-197. doi:10.1093/qje/qjr049

    Matsa, D. A., & Miller, A. R. (2012). A female style in corporate leadership? Evidence from quotas. Northwestern University. https://www.kellogg.northweste...

    Also, selection bias is very strong here because only competent and highly talented women are making it to boards in the first place. Obviously this is not representative of women in general, so no claims can be made here for broad gender differences among the general population.

    Also, the authors claim that the differences they found on CMR is due to innate genetic differences between the sexes, without providing any evidence for this whatsoever. It is just a clumsy, half-assed explanation, which literally ignores several socially relevant variables, that they have concocted to explain their results on the CMR. In fact, in 1980s, men scored higher than women on CMR (See Clopton, 1993), and this is admitted in the study, so what the heck?

    Saying that one sex is inherently better than the other at corporate decision making is exactly the kind of thinking that kept women out the the boardroom in the first place. Tthat these researchers would make such a far-reaching and disingenuous claim, with tremendous social ramifications, based on limited, statistically problematic dataset is truly contemptible. This is not science, it's "advocacy research." I'm all for more women in the board room,  but this is not the way to conduct proper research on the subject. All you have to do is look at the actual literature to see why these guys are wrong.

  • + Bang For Your Buck

    Have you heard any feminists campaigning for more male teachers? Having such a massive majority is clear sexism and that children need
    men as well as women to teach them? Of course
    not, because where women outnumber men this is just a clear sign of
    their superiority, where men outnumber women then this is just
    oppressive sexism. Odd, isn't it?

  • James Lyons

    I support more women in senior positions.  But this piece of flawed stats is ridiculous.  Read up on selection bias, and try again.  The problem with this is you're comparing a large pool of men of varying abilities with the few women who have miraculously broken through to the higher ranks (ie, they are exceptional) and then using those two populations to make broad gender based claims.  Its not a correct comparison.   Its classic selection bias -- the women today that make it are not "typical".  And of course if you compare the extremely talented to the general pool -- the talented come out on type.

  • Álex García

    This data and study only suggests that women are great administrators but not necessarily leaders.

    I'm curious as to why if women were so good at being leaders why they are not so good at getting the job or making that job for themselves as entrepreneurs?

    Regardless, 150 women is such a small sample that this is laughable.

  • The Corporate Prof.

    The business case for women on boards is truly formidable and sufficiently compelling. Quite frankly, forward-looking companies are taking the call for more women on boards seriously. Nevertheless, women must be careful not to spoil a good case by overflogging the issue as that seems to attrack negative sentiments (as can be seen from some of the earlier comments). Such negative sentiments do not help the good cause of having more women on boards.

  • Livin_Large

    "...make better corporate leaders...."

    All generalizations are false. There are some miserable excuses for corporate leaders out there and it doesn't have much to do with what's going on under their belts.

  • Livin_Large

    Erin, I'd love to take credit for "All generalizations are false" but it's a cute cliche I learned at Dead Poets Academy. But I'm glad you spotted it.

  • Erin Hoffman

    "All generalizations are false"?

    I'm just commenting here so you think about that statement for another second.

  • Lucasl1990

    causes being to what extent nature or to what extent nurture? this is the more interesting question. we must accept the science, but be careful how we apply it.

  • Magimom06

    Although I agree with the majority stated, I can't help but point out on statistic that might have been better left off... If we account for a 42% higher return on sales, and only 2 parties can be judged, doesn't that mean men account for the other 58%?  I'm all for girl power, but that statement has a boomer rang affect.

  • aruncsatsangi

     WITHOUT
    PREJUDICE: No malice towards any gender nor bias but, to quite an extent
    given the opportunity, apparently it is fair to admit the fact.

  • Cheryl Rings

    I'd venture a guess that organizations that are open to women in these rolls are also a bit more forward thinking and out-of-the-box to start with which is probably the reason for their results.  Perhaps the women on the board are a symptom of a stronger company, not the reason for it...  although as a woman I'd love to think we're just better ;)

  • Xxyy55

     Agree. Plus, when there are sooo many men out there, the worse of them can pull the statistic down (to their disadvantage). Still, men (and women for that matter), should give up " I can't work with an (attractive) woman" BS.

  • MĨ`ÇĤÈLÈRÈÑÈ`

    InnaTeLy I believe this to be true.
    Of Course, always exceptions to rules, however
    a well★balanced and analytical★woman
    with sincere interests and desires to build,
    create★ motivate★ innovate★, etc., is better equipped
    To OperaTe★ ~ Like Running An Efficient and
    Effective Household; she wasmade to see
    theeWHOLE oVaTHING and nurture★ an environment★
    to Productivity★ Peace★ Higher★Heights and ADVANCE★

  • Honest_Miss

    Could we please stop with the 'men are better at...' 'women are better at...' bull? Inevitably there are things each gender has a stronger leaning toward, but pointing it out doesn't bring us closer to equal work environments.

    And that's without mentioning the fact that every person /within/ a gender is fairly unique and may not fit within these wide-sweeping statements.