The impact of firms’ gender diversity targets on the work motivation and

turnover intentions of managers

A research sketch Orsola Garofalo and Georg Wernicke

Questions? Write to: gwe.int@cbs.dk

Top management teams back in time…

Nowadays…

Black Rock 2011

17 members (3 not shown)

BlackRock, Inc. (NYSE: BLK) – U.S. investment firm & world's largest asset manager

Executive Committee Carlsberg 2014

Senior Vice President, Group Communications & CSR since 2004

Female Directors around the World

Overview Gender Quotas

Gender Diversity – Business Case • Claim: Gender diversity on boards has a positive effect on firms’

bottom line (e.g. increase firm value/performance…) • Studies supporting this claim often echo well in the media

McKinsey report “Women Matter” 2009 Credit Swiss Report 2014

Media Echo Credit Swiss

But…

1. Measure correlations and not causation 2. Often ignore the most obvious background

variables 3. Fail to differentiate between top management

teams and boards (McKinsey) – but effects are likely to differ

4. Fail to account for other reasons why firms with more gender diverse boards/top management teams perform better (endogeneity)

Selective Research Evidence • Diverse findings (positive, negative, insignificant

impact) using different samples, time periods, econometric approaches

• Endogeneity issue: Adams and Ferreira (2009), based on 1500 largest US firms, long time period, director networks: relationship btw. gender diversity and firm performance is, if at all, negative

• Quota (Norway): Ahern and Dittmar (2012), negative impact on firm value/returns compared to US benchmark driven by firms with no prior female board member

Take-Away • Popular studies often suffer from severe

shortcoming • Conclusions from research are not clear cut,

but point to, if at all, negative effect – …but short vs long term effects (…)

• Indication that boards/TMT: – Matter – Are composed to maximize firm value – Are specific to a firm

Idea in a Nutshell • Diversity targets might affect:

– Employee (female and male) work motivation – Turnover intentions (male)

• Explanation for the short term negative effect on firm value/performance of quotas

• Theoretical basis: tournament theory • Level of observation: top management team • Method: experiment

Deutsche Telekom 30% in 2015

Carlsberg

Tournament

Winner gets promoted to top management position

25% chance to win

Talent Pool for Top Management

Best 1,2,3…get promoted

Diversity Target 30%

Female Manager Male Manager

Gender Quota 30%

Female Manager Male Manager

Experiment

Experiment

No chance of being promoted 50% chance of being promoted

Experiment cont.

30 % chance of being promoted

50 % chance of being promoted

No chance of being promoted

Our Expectations • The higher the diversity target, the lower the

chances of male talents to be promoted, thus: 1. Stronger reduction in their work motivation 2. Increasing willingness to change employers

• Potentially also: – Lower work motivation of female employees as

chances to get promoted are significantly higher (e.g., just need to come in on 3. place)

Expansions

• Level of competitiveness (some males might just work even harder thinking they are better than everybody else anyways)

• Effects of higher diversity in the talent pool (1 vs. 50% females)

• Effect of binding quota vs. diversity target • ….