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When Women Run the (Corporate) World

layoffThink about a family member, friend, neighbor or colleague who recently lost his or her job. Then ask yourself: Would that person still be employed at their former company if that company had more women running the show?

Given the recent debate about women in high-powered jobs, and with unemployment stuck above eight percent, it's not a frivolous question. And we're starting to edge toward an answer. In 2006, Norway imposed a quota system for boards of directors of public companies. Within two years, the law stated, at least 40% of directors had to be women, and at least 40% had be men. (So far, under-representation of men has not been a problem.) Ever since those thresholds were reached, researchers have been digging in, trying to figure out if more women in high places makes any difference.

One of their more recent findings: It does make a difference. Specifically? Fewer layoffs.

More Women, More Jobs

After more women were added to Norway’s corporate boards, researchers found that “larger layoffs” -- those that affected more than three percent of the workforce -- at those companies dropped by 20 percentage points compared to previous years. More telling: Layoffs decreased by 13 percentage points compared to other Norwegian companies that weren’t affected by the quotas. That works out to about 110 jobs at each of the companies in Norway that were affected. It’s mostly people at the lower salary levels who are being spared.

There’s ample evidence that this is more than just a weird Norway-only phenomenon. The researchers compared Norwegian companies to similar ones in Sweden. They also looked at private companies in the U.S. In all cases, they found the same thing: More women on a company’s board of directors means fewer layoffs.

“The results are very strong and clear,” says David Matsa, a professor with Northwestern University’s Kellogg School of Business, who conducted the research with Amalia Miller, a professor at the University of Virginia. “The more difficult step is to determine what it represents.”

The Fairer Sex? Really?

After ruling out a number of explanations having to do with the age of directors and the effectiveness of boards after the quotas were installed, Matsa and Miller came up with two possibilities. One is that women simply care more about workers, and believe their role as board members goes beyond simply increasing shareholder value. The other is that refusing to lay people off is a sound economic strategy, which men have somehow overlooked.

I’m not crazy about either of these explanations. The first is a stone’s throw from saying “Women are the fairer sex,” which is one of the many arguments many used to try to deny women suffrage in the last century. The rationale was that women were fundamentally unsuited to the dirtiness of politics, and it wasn’t fair to ask them to sully themselves by participating.

But Matsa cites another study, this one done in Sweden, that seems to show that women board members do have different values than male ones. In this study, board members of both sexes were asked a series of questions commonly used on psychological tests, and the women did show more “universal, benevolent, self-transcendent,” values, says Matsa. Achievement and power mattered more to men.

Then there’s the argument that layoffs just aren’t smart, economically. That sounds great, if it's true. But if holding on to workers is the best long-run economic strategy, why haven’t men figured it out? Boards of directors might be overwhelmingly male, but they also tend to made up of pretty smart people, with plenty of excess MBAs to throw around.

What the research does show, though, is that women unequivocally bring something different to the leadership of big corporations then men do. This isn’t the only study to show that. Increasing the proportion of women on a company’s board has been shown to increase a company’s return on sales, return on invested capital, and return on equity. Until women are represented equally on boards with men, big companies are going to be missing out on half the world’s wisdom. Given all we hear about globalization and increasing competition, I have a hard time believing they’re really okay with that. -- Kimberly Weisul

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