Sometimes we all know something is a good idea but still drag our feet in doing it. Whether it’s reducing CO2 emissions or making sure business leadership is more diverse, the reason for the delay is often the same — without some strong push, the inertia of outdated ideas and old habits outweighs the rational case for change.
But give the status quo a short, sharp jab of reality — often in the form of a startlingly large price tag for inaction — and you can sometimes rock a community out of its slumber. Which is just what a new report from accountancy firm Grant Thornton aims to do.
The research crunches numbers to determine the cost to large companies of having all-male executive boards running the show, and while it’s far from the first report to conclude a lack of gender diversity is a terrible idea from a business perspective, this analysis produced one particular attention-grabbing finding.
After analyzing data on 1,050 publicly traded firms in India, the US, and the UK, the report calculated the total cost of all-male executive boards for 2014. How much does just one year of poor gender diversity among executive board members run these three countries?
A startling $655 billion dollars.
The figure was calculated by looking at the higher return on assets for firms with diverse boards. In the US, for example, companies with at least one woman executive saw a return-on-assets of 8.6 percent. For boys club boards that figure was significantly lower at 6.7 percent. As Francesca Lagerberg, global leader for tax services at Grant Thornton, explains, “diversity leads to better decision-making.” Tally up the difference in performance for all three countries and you get the hefty figure above.
(And if you’re in the market for more startling numbers having to do with gender diversity, “the findings come on the heels of a report by the McKinsey Global Institute that showed $28 trillion could be added to global GDP by 2025 if men and women contributed equally to the workforce,” the UK’s Guardian newspaper notes. Yes, trillion.)
Progress has been slow when it comes to getting more women into executive roles (the number of female board members is climbing but just 13 percent of these female board members are employed as executives). Grant Thornton is hoping that sticker shock might compel companies to move faster.
“Just one in ten of the companies we analysed have women board executives. I believe that organisations have not seen a clear business case for change but the work we have done articulates the advantages of diverse boards in a language that businesses will understand,” Lagerberg says. “If companies don’t instigate change then their investors will quickly become concerned they are missing out on potentially huge performance benefits,” she predicts.