A Risk Worth Taking: Women Leaders are Good for the Bottom Line
“Risk is a mixture of danger and opportunity”—a quote by Sana Mohsni, Associate Professor, Finance—a person who is highly intrigued by corporate risk-taking behaviour.
Sana has many projects on the go with collaborators from around the world that look to uncover how changes in firms’ governance, policies, and organizational structure shape risk tolerance and appetite. For instance, she looks at how firm privatization influences firm risk behaviour, or in another study, if the establishment of corporate directors and officers insurance influences a firm’s risk behaviour.
Sana is certainly a numbers person and quantitative data, usually measured through profit maximization, is instrumental to evaluating the success of firms, but Sana is also tapping into an area of business that is quite noteworthy. In a concurrent collaborative project, Sana examines the impact of gender diversity on the performance of companies and their risk-taking behaviour. What is incredible is that their findings are substantiating the value of women as board members—and they have the numbers to prove it.
From Tunisia (where Sana was born and raised) to Canada, and the numerous countries in between, Sana has visited and collaborated with many scholars from around the globe; experiences that have allowed her to build a robust research program that fosters and infuses multiple perspectives from different corporate cultures. But it has also punctuated the reality of gender inequality and discrimination against women in business. Sana is keen to change this. Sana wants to better understand both the impact of gender diversity on the bottom line (profit maximization), as well as the impact to the risk-taking behaviour of firms when more women occupy board seats.
Traditional measures of firm success would suggest that increased risk equals better performance. And, traditionally, when men drive decision-making on boards, risk-taking is considered high and performance profitable—a formula that persists in the business culture. Sana’s research findings, however, are throwing a curve ball to this ideology. When comparing the performance of firms with female directors to firms without, the female-strong firms’ risk-taking behaviour was notably reduced, but it was done without compromising performance—there was no negative outcome. In fact, firms with more women on their boards often performed better than those with less women on their boards. These findings are extremely significant and demonstrate that firms can have the best of both worlds—less danger, more opportunity.
“We need more women on boards. Their presence brings unique skills, balance, and a voice. It’s their critical mass that influences board behaviour in a very positive and productive way. The numbers prove this.”
In addition, with more women occupying board seats, the board becomes more disciplined, has better monitors, and effective critical thinkers—resulting in greater accountability, a modifying risk culture, and ultimately improved profit maximization. Sana will further examine which factors drive this inverse relationship between risk and performance when women are leaders. “It may be where women leaders choose to take risks.”
Notwithstanding, it is quite simple: without women on boards, companies may be taking unnecessary risks and incurring undue costs. Conversely, female leadership is proven to increase performance, even when risk-taking behaviour is more conservative. This is sure to be intuitive—the world needs both women and men to create a balance of perspectives and provide unique skillsets and decision-making abilities. Yet many countries lack a stringent enough regulatory framework that incentivize and encourage corporations to meet a minimal and acceptable ratio of female representation at the board and executive levels—this is particularly evident in highly masculine societies. Even Canada with its current, “Comply or Explain” regulation (enacted in 2014), which is arguably weak. If a publicly traded firm cannot meet the 30 per cent gender diversity expectation for board members, they only need to explain why. Moreover, it remains unclear if the regulation is motivating business to reach the desired percentage at all. “There is a movement, a political desire, to increase gender diversity in many countries; in those societies that recognize the value of women in business, for example. In Canada, the government is moving in the right direction and considering tougher regulations. We are transitioning, but it’s slow.”
Sana knew very early on that she would pursue higher learning and explore the world, ever curious about social phenomena (and cats, but that’s another story!). She was raised by parents who valued education and wanted their daughters to grow up in a world where equality was guaranteed. Now Sana’s research is helping to change mindsets, not just in Canada, but throughout the business world—contributing to the narrative of the importance of equality and inclusivity—that the value of women in business and on boards transcends cultures. She is proving, through the numbers, that women are indeed valuable, productive, and certainly worthy of leadership. And that is a risk worth taking.