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Want More Profits? Try Putting Women in Leadership

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By Casey C. Sullivan, Esq. on February 23, 2016 12:59 PM

If arguments about gender parity, viewpoint diversity, and good old-fashion equality hasn't convinced you of the importance of women in leadership, maybe this will: having women in power is connected to increased profitability.

A study recently released by the Peterson Institute for International Economics and EY (Ernst & Young) shows that having a woman in the highest corporate positions is correlated to better profits. The legal industry, long dominated by men, might want to take note.

Gender Diversity Is Profitable

The study looked at 21,980 publically traded companies from 91 countries and found that "the presence of women in corporate leadership positions may improve firm performance." The research builds on earlier studies of U.S. companies, which found that greater gender balance was associated with higher stock values and greater profitability.

That improved profitability does some social good too, it seems. The study found that women's presence in corporate leadership also correlated to "national characteristics such as girls' math scores, the absence of discriminatory attitudes toward female executives, and the availability of paternal leave."

Of course, your results may vary. The study looked at publically traded businesses, not law firms. And not all female leadership meant improved outcomes. Female CEOs gave no significant boost to a company's performance, for example, nor did they stymie it. And while the study shows that increased women on corporate boards has positive impacts, the director of studies at the Peterson Institute, Marcus Noland, notes that "in statistical terms that evidence is not robust," according to The New York Times.

But when it comes to management, the message is clear: upping the share of share of women in top management positions from zero to 30 percent would be associated with a 15 percent rise in profitability, according to Nolan.

A Shared Failing

Despite the corporate benefits, women in leadership roles are still hard to find. Of the nearly 22,000 companies the study looked at, less than five percent had a woman CEO, 60 percent had no women on the board, and more than half had no female C-level executives.

Sound familiar? Both the corporate world and law firms have a long way to go to achieving gender parity -- or even basic female representation. A 2014 report by the National Association of Women Lawyers found that there are few female equity patterns, partner lateral hiring favors men, and that women often get paid less than their male counterparts.

Thankfully, Peterson Institute's study shows what many have long said: treating the law firm or the executives' lounge as a "boys only" club isn't just decidedly old-fashioned, it's bad business.

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