The damaging myth about why we need more women on corporate boards

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With increased attention paid to the lack of women running companies, it’s often repeated that adding women to corporate boards isn’t just the right thing to do, but a wise move financially.

Carolyn Maloney, a US congresswoman from New York, is among the latest to have made that case, when she introduced a bill in February that would require companies to disclose the number of women on their boards and their efforts to recruit more women into senior management.

“Every study shows that it’s not just good for half the population, it’s important for the bottom line,” Maloney said. “Profits go up when women are in the boardroom.”

It’s a compelling argument. But here’s the catch: There’s no actual evidence that it’s true. Lots of studies show a correlation between higher female board representation and higher returns, but no one has definitively proven causation; in other words, that it’s the act of adding women that drove the financial performance.

In any case, most executives probably don’t believe that adding women helps profit, because they realize the factors behind profitability are far too complex to be solved that simply, says Robin Ely, a professor at Harvard Business School who studies gender issues in organizations.

The danger, she says, is that because the add-women-boost-profitability argument is easy to dismiss, executives also may be quick to reject other, sounder reasons to put more women on the board. For example, corporations with more female representation at the board level have more women in senior executive position, and a narrower wage gap between genders. The evidence as to the direct effect on profitability is thinner, which has Ely worried that advocacy based on the financial-returns argument will end up working against the cause.

“It’s potentially damaging because it allows those decision makers not to take seriously the idea that they should be diversifying their ranks,” Ely tells Quartz. “And there are some empirically well-grounded reasons for increasing women’s presence on boards.  It’s just that, so far, enhanced financial performance isn’t one of them.”

Ely’s own research shows that groups with racial and gender diversity can make better decisions. “The question for boards, then, would be whether they are actually using their diversity as a resource for learning,” she says. “If they are, then they may well make better decisions. Whether, or more importantly, under what conditions those decisions would have a significant impact on financial performance is another matter.”

A recent report from the Peterson Institute for International Economics said that while revenue improve with the presence of women on boards, the effect disappears when looking at net margin. (There was, however, a clearer tie between profits and representation of women in day-to-day senior management roles.) And a 2010 study of companies in Norway, where a law requires 40% of board seats to be filled by women, showed that financial performance declined. Of course, this was in part because the quota caused a scarcity problem, and led to less experienced women joining boards.

Promoting diversity in companies is hard, and often comes with a price for those who speak out: New research from the University of Colorado shows that when women and minority executives promote or hire other female or nonwhite candidates, they tend to be punished for it with lower performance ratings.

Given all the obstacles to creating a equitable workplace, it seems wise not to rely on arguments for doing so that can be so easily rejected.