Why Diversity Matters: Women on Boards of Directors

The business benefits of having women on a board of directors are numerous, and they include broadening your talent pool and even higher return on equity.

Having an effective board of directors is crucial to an organization. Even if the average person might not be able to name an organization’s board members, they have a strong impact on how an organization runs, makes decisions, and ultimately, on its success. This is particularly true in the health care, biotech, and pharmaceutical spaces, which are growing more complex almost by the day as regulations change.

Therefore, bringing in a variety of perspectives, backgrounds, and experiences can be key to an organization’s success. One way to bring in these diverse perspectives is through gender diversity on a board, and yet women only make up a small percentage of boards of directors in the United States.

One way to bring diverse perspectives to an organization is through gender diversity on a board.

The percentage of women on boards overall in the United States is between 11 and 12 percent and has barely increased in the last decade. For health-related companies, the numbers of women on boards vary greatly, from 9.7 for biotech companies with under 1,000 employees to 27 percent on hospital boards. Generally, at Fortune 500 health care companies, 21 percent of board members are women, despite the fact that women make up half the workforce of these companies.

While many companies claim the priority of appointing the best person regardless of gender, these numbers illustrate that this is not necessarily happening when it comes to actual board recruitment processes. And yet, there are many reasons that hiring a diverse board is good for your company, from having a positive impact on financials to increasing your potential talent pool.

Having women on your board is good for your bottom line.

Many studies have shown that having a more diverse board is good for business. For example, of the 842 active companies on the Fortune 1000, women hold 18.8 percent of board seats – an increase from 17.7 percent in 2014 and 14.6 percent in 2011 – and 45 percent of all companies on the Fortune 1000 have 20 percent or greater women on their board. In addition, over 55 percent of the companies that became inactive on the index had one or zero women on their boards.

Companies with women directors on their board also perform better than those without women by specific metrics. For example, when Fortune-500 companies were ranked by the number of women directors on their boards, those in the highest quartile in 2009 reported a 42 percent greater return on sales and a 53 percent higher return on equity than the rest.

Women earn 57 percent of bachelor’s degrees, over 62 percent of master’s degrees, and 53 percent of degrees such as PhDs, medical degrees, and law degrees in the United States.

There are several reasons that companies with more diverse boards perform better. One is that diverse boards often better mirror customer and client bases. This is particularly true in health care, which is a complex space with a very diverse customer base. Having a diverse board can help you better understand purchasing and usage decisions, particularly as studies have found that women drive 70-80 percent of purchasing in the United States. Even for B2B businesses, having a diverse board can help you better understand your customers. In hospitals, for example, women make up 83 percent of the general workforce, 65 percent of directors, and 43 percent of executives. Without women on your board, you are missing a valuable opportunity to bring in voices that represent this broad swath of potential and actual customers and clients. As the Committee for Economic Development, a Washington DC nonprofit policy organization, said in their report “Fulfilling the Promise: How More Women on Corporate Boards Would Make America and American Companies More Competitive,” “no company will remain competitive for long if it ignores half of its available labor pool.”

Having women on your board helps you develop a broad talent pool at all levels.

By diversifying your board, you increase the number of potential board members, and thus increase the chances that you will end up with a board member who has the necessary skills, experience, and intelligence to make good decisions for your organization. In addition, you do more than widen the talent pool at the top of the company — you send a signal that developing women and minorities as leaders is generally important to you.

This can help lead to employee diversity, which in turn can help you in several ways. Women earn 57 percent of bachelor’s degrees, over 62 percent of master’s degrees, and 53 percent of degrees such as PhDs, medical degrees, and law degrees in the United States. This means that there is a large talent pool of women who can greatly add to your workforce, not just in terms of their gender, but in the range of experiences and competencies that they can bring to your organization.

Proactive hiring of women is important at all levels, but putting women on your board can set the tone for the rest of your hiring. For example, there is strong evidence of a “leaky” pipeline in scientific fields, including biotech and the pharmaceutical industry. Women receive high numbers of scientific bachelors and master’s degrees, fewer PhDs, get even fewer postdoctoral positions, and so on. One of the reasons for this pipeline is that women feel there is a gender bias in these fields, whether conscious or unconscious. Women often feel isolated, with a lack of female role models and sponsors. While having women on your board won’t necessarily solve these problems, it can go a long way towards helping create an organizational culture that values and encourages diversity.

Diverse voices equal new ideas.

Diversity is not just about numbers. While quotas can be useful, having women or minorities on your board but ignoring their contributions and opinions doesn’t add value to your organization. It might take effort to change people’s mindsets, but listening to and including the viewpoints of your diverse board in a real way can bring a new perspective and new ideas to help your organization succeed. While there are many ways to bring diverse perspectives to your board, hiring women and minorities, who have inherently had a different experience, is one way to do so.

Listening to and including the viewpoints of your diverse board in a real way can bring a new perspective and new ideas to help your organization succeed.

There is often a tendency to choose people who “look like me” for a board, whether it is because it’s assumed that people like the others will fit in better or because it’s assumed that that’s what the talent pool looks like; a survey of over 500 hiring managers found than 74 percent of leaders reported that their most recent hire had a personality similar to their own. However, when you lack diversity on your board, you run the risk of not hearing potentially useful ideas for your organization, as well as not examining potential downsides of ideas. The Harvard Business Review, for one, cites research that shows companies with women directors deal more effectively with risk and focus more strongly on long-term priorities.

Whichever reason resonates most strongly with you, having a diverse board is good for business at all levels. By making it a priority to bring in a range of voices and encouraging women to be leaders, you can improve your organization’s performance and create a robust pipeline for future organizational leaders.


Harvard T.H. Chan School of Public Health offers Women on Boards: Getting On and Adding Value, a leadership program for women aiming to sit on a health care board of directors. To learn more about this opportunity, click here.