• Research shows major economic crises, like the 2008 crash, reduce gender diversity on boards
• Companies enter “survival-mode,” de-prioritising “softer” initiatives like diversity
• The rise in economic crises makes gender diversity increasingly vulnerable, requiring stronger protections

Over recent years, gender diversity on corporate boards has seen notable progress, driven by concerted efforts from governments, organisations, and advocacy groups. Initiatives such as the 30% Club, which aims to achieve at least 30% female representation on boards, and gender quota laws in countries like Norway and France, have been instrumental in driving this change.

In the United States, Nasdaq introduced a groundbreaking rule requiring listed companies to disclose board diversity and have at least one female director. These efforts have yielded measurable results: as of 2023, women held 32% of board seats globally, a significant rise from just 15% in 2010.

This growth reflects not only the effectiveness of these initiatives but also a broader recognition of the value diverse leadership brings to organisational success – progress is being made!

However, despite the strides made, progress remains vulnerable to setbacks, particularly during times of economic uncertainty. Recent research conducted by faculty at emlyon business school and Surrey Business School highlights how major economic crises, such as the 2008-2010 financial crash, can reverse gains in board diversity.

The study, by Professor Shibashish Mukherjee, and Sorin M.S. Krammer found that during such crises, companies often deprioritise initiatives like gender equality in favour of immediate survival strategies.

And unfortunately, in today’s world, crises are becoming increasingly frequent and varied. The COVID-19 pandemic triggered a global economic slowdown, while geopolitical tensions like the Russia-Ukraine conflict have disrupted supply chains and energy markets.

And that’s not to mention more recent moves from the US when it comes to international trade relations, or the roll back of DEI initiatives at Citibank, Pepsi, Meta, McDonalds and others. All of this is posing growing challenges to board diversity.

The Impact of Economic Crises on Gender Diversity

To conduct the study, the researchers investigated board compositions before and after the global financial crisis, analysing data from over 10,000 corporate boards in 21 countries.

Their findings were striking: there was a significant and robust decline in gender diversity on boards during the aftermath of the crisis. This trend was evident across various board positions, areas of expertise, and levels of firm performance.

In essence, the crisis prompted companies to deprioritise gender diversity, resulting in the removal of female executives, including those in specialised roles such as Chief Financial Officers (CFOs).

Professor Mukherjee says, “In times of crises, firms are forced to prioritise saliency and legitimacy differently than in ‘normal’ times. In turn, this shifts corporate focus away from ‘softer’ issues such as gender diversity to navigating the crisis as robustly as possible.”

In other words, the pressure to weather economic storms often leads companies to revert to traditional structures and practices, sidelining initiatives aimed at promoting inclusivity and diversity.

Do Female Leaders and Quotas Make a Difference?

The study’s findings also raise questions about the potential mitigating factors that could counteract this trend. For instance, does having a female CEO or implementing gender-specific affirmative policies such as board gender quotas make a difference? Surprisingly, the research found that neither of these factors significantly shielded companies from the decline in board gender diversity. Even in firms led by women or those operating under quota systems, the prioritisation of gender diversity took a backseat during the crisis.

“These results provide interesting insights as female leadership would suggest some movement towards equality for women, who face considerable challenges climbing the corporate ladder,” Professor Mukherjee noted. “Yet, in times of crises, the focus on gender equality, even for a female CEO, drops down significantly.”

This finding highlights the systemic nature of the issue, suggesting that individual leadership or policies alone are not sufficient to sustain progress in the face of major disruptions.

Acting to Ensure The Future

So, what does this mean for the future of gender diversity on boards? The study’s implications are both cautionary and instructive. It serves as a reminder that progress in gender equality, while significant, remains vulnerable to external shocks.

In times of economic stability, companies often make strides in diversifying their leadership. However, when faced with crises, these efforts are at risk of being deprioritised, exposing the need for more resilient mechanisms to safeguard diversity initiatives.

Policymakers and corporate leaders can draw valuable lessons from these findings. To ensure that gender diversity on boards is not merely a “fair-weather” commitment, companies must embed inclusivity into their core strategies, making it an integral part of their resilience planning.

This could involve strengthening board governance policies, fostering cultures that value diverse perspectives, and recognising the long-term benefits of gender-balanced leadership even during turbulent times.

So what next?

The 2008-2010 financial crisis may now feel like a distant memory, but its lessons are more relevant than ever. As the world faces ongoing challenges-from economic uncertainties, significant political shifts and enduring concerns about the climate – the importance of ensuring inclusive leadership can continue to thrive, in the face of such disruptions cannot be overstated.

Ensuring that gender diversity remains a priority, even in the toughest times, is not just a matter of equity but also a driver of innovation and performance in an increasingly complex global landscape.

By, Peter Remon

Interested in this topic? You might also like this…