Women empowerment seems to be nearing a new epoch as the government and firms all over the world are encouraging more women representations in the boardrooms. New ideas and efforts to educate and empower women are being introduced to make women capable of taking over important responsibilities. While this changing cycle is appreciable, it is also important to understand the potential reasons for this change.

Key Takeaways:

  • It is proved that female board member in firm challenges and accentuates the overconfidence of male CEOs.
  • They bring onboard different options with pros and cons when the firm is taking important decisions. This accentuates the overconfidence and biased beliefs of the male CEOs.
  • They will lead to less aggressive investments and better acquisition decisions.
  • They won’t let the CEOs take impulsive decisions and make aggressive investments that made the firm vulnerable to the crisis. 

Why having women board members is helpful for firms

Many researches earlier have maintained that having women representative on board in firms allows diversity, better acquisition and investment decisions and less aggressive risk-taking making benefits for the shareholders. But, why does the difference in gender cause such differences in the firm? What is inherent in the women board members that men in the firm lack?

They won’t let the CEOs take impulsive decisions and make aggressive investments that made the firm vulnerable to the crisis. Firms that do not have female board members have suffered great loss in these criteria.

Recent research on the effect of female board members in a firm has made baffling revelations. It is proved that female board member in firm challenges and accentuates the overconfidence of the male CEOs. This is in addition to the benefits that women board membersimprove gender diversity and bring in new perspectives. This is one of the potential reasons why women are encouraged to participate in board discussions.

Why overconfidence of male CEOs is threatened by women board members

Overconfidence in CEOs of firms have obvious factors like constant profit, successful endeavours and little to no loss. However, this overconfidence is detrimental to the firm and more common in the male CEOs. An overconfident CEO becomes a threat to the performance and profit of the firm. He tends to overestimate the returns of projects and underestimate the probable risks. This results in overinvestments, excessive-risk taking in trying something new and hence destroying the shareholder values. The board, which supervises the CEOs can play a vital role in moderating their overconfidence and reducing the loss and risks in the firm. If the board members are female, according to the research the overconfidence of the CEOs can be tempered to a greater extent along with additional benefits to the firm.

How do women check the overconfidence of male CEOs

The reasons why women board members can challenge the overconfidence of the male CEOs are hidden in the same reasons why women should be hired in the firms. Having women onboard in the firms increases diversity and new viewpoints. The availability of multiple perspectives improves the quality of board deliberations on complex issues.

Besides, research has concluded that women board members are less conformist and tend to express their individual views and ideas. While the male members do not express newness and tend to follow the old-boy networks. Therefore, with the multiplicity of perspectives and the itch to present individual and unique ideas make women challenge the overconfidence of the male CEOs. They bring onboard different options with pros and cons when the firm is taking important decisions. This accentuates the overconfidence and biased beliefs of the male CEOs.

Also Read:  Rise In Number Of Women Insurance Advisers And Buyers, Says Report

Presence of women directors impact the decision making of the firm

It is proved that women board members are capable of challenging and reducing the overconfidence of male CEOs. But what is the impact of this change in the decision-making of the firms? Since, the overconfident male CEOs are not healthy for the firm because of their impulsive and biased decisions without considering the risks that might involve, the presence of women board members can keep this impulsiveness in check. They will lead to less aggressive investments and better acquisition decisions. This makes the gender diversity in firms important for industrial firms where male CEOs are more likely to be overconfident. The examples of these firms could be pharmaceuticals, computer software, coal and construction.

They bring onboard different options with pros and cons when the firm is taking important decisions. This accentuates the overconfidence and biased beliefs of the male CEOs.

In fact, the ability to be composed and avoid aggressive investments and risk-takings make women board members more important in the industrial firms that are often hit by unpredictable crisis. Having women on board in such firms, the negative impact of unpredictable crisis can be removed. They won’t let the CEOs take impulsive decisions and make aggressive investments that made the firm vulnerable to the crisis. Firms that do not have female board members have suffered great loss in these criteria.

Concluding, the research establishes that women as board members improve the decision making with the considering of risks and other options. They are beneficial to the firm.

Rudrani Kumari is an intern with SheTheProple.TV

Also read: Women CEOs Work Harder & Longer, Have Differential Traits: Study

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