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For sake of Diversity, more women wanted as CEOs & in Board positions

November 27, 2011

Scarcity of senior women at big corporations remains a concern as much for media as for diversity practitioners. “The total number of women CEOs in the Fortune 500 is only 15, up from just 2 when the list debuted in 1998.”

“Indeed at a time when women have gained more standing in politics & society, they have not made equal progress at the top of corporate America. Women comprise half of the workforce but hold only 16% of the board seats in Fortune 500 companies. More than 10% of those companies have no women serving on their boards.”

Are quotas any solution?

“The problem with quotas is that they are a one-size-fits-all solution”, notes Wharton finance professor Alex Edmans. “Shareholders have an incentive to appoint the best people to a board. It is true that, in some firms, there may be discrimination, but it is very difficult for regulators to know which firms these are. The best solution (to eliminate) discrimination is market forces. If a firm is not promoting the best people – some of whom are invariably women – it will lose business. It’s just like a baseball team that refuses to hire ethnic minorities: It will be less effective on the field and lose its league position.”

“The more diverse the background, expertise and experience of the board members, the better they will be at issuing guidance.”

That’s a good argument not just for gender diversity, but also for bringing in board members of different races and nationalities.”

The SEC could for instance take a cue from Australia and issue a formal requirement for firms to institute a board diversity policy that consists of measurable objectives.

“Now access to education seems to be much fairer, and so there should be a very strong pipeline of qualified women and other minorities in the future”, says Edmans.

http://knowledge.wharton.upenn.edu/article.cfm?articleid=2861

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