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It should not be relied on as a substitute for legal or corporate advice. b 1 Foreword 7 Evidence: Organizational and Human Capital Benefits of Gender- 49 Diverse Boards Acknowledgement 8 Corporate Governance 50 Board Dynamics and Company Credibility 50 Executive Summary 11 Employee Satisfaction 51 Talent Attraction 52 Introduction 17 Innovation 52 Why Corporate Governance Matters and the Connection with Gender- 18 Diverse Business Leadership Insight: Barriers To Entry For Women On Lebanon’s Boards 54 Lebanon’s Corporate Governance Context 22 Gendered Social Expectations 54 The Status of Women in Lebanon 23 Stereotyped Workplace Roles 56 About the Study 24 Lack of Standardized Governance Practices and Legal Disconnects 57 Challenges to Women’s Performance on Board 58 Research Methodology 27 Sample Size and Characteristics 27 Action: Recommendations To Increase The Number Of Women On 61 Sectoral Distribution 30 Lebanon’s Boards Company Performance Indicators 30 Corporate Governance Improvements 62 Data Collection 31 Change Societal Perceptions About Women 64 Research Limitations 32 Reshape Companies and Sectors from the Inside Out 66 Analysis: How Women On Boards Impact The Financial 35 Conclusions: A Regional Picture Emerges 70 Performance Of Lebanese Companies Profitability Performance for Lebanese Companies 36 Key Facts & Figures 72 Capital Structure and Solvency 37 Cross-Sector Analysis 39 Appendix A. Advisory Board Members 74 Appendix B. About The Interview And Focus Group Process 75 References 78 2 3 Contents LIST OF FIGURES Figure 1.1 Women’s representation on boards, as % of total board directors 19 Figure 1.2 Regional overview: Women’s participation in senior business 20 leadership in MENA Figure 1.3 Closing the gender gap: How long it will take to achieve gender parity 21 in different regions Figure 2.1 A statistical analysis of Lebanese companies looked at the correlation 26 between gender-diverse boards and company performance Figure 3.1 Profitability measures for Lebanese companies 36 Figure 3.2 Average ROE and ROA of Lebanese companies in sample, by number of 37 women on boards Figure 3.3 Capital structure and solvency, all sectors, by year 38 Figure 3.4  Capital structure and solvency overview, all sectors, 2014–2106 39 Figure 3.5  Cross-sector profitability analysis, by year 41 Figure 3.6  Overview, cross-sector profitability analysis, 2014–2016 42 Figure 3.7  Cross-sector capital structure and solvency analysis, by year 44 Figure 3.8  Overview, cross-sector capital structure and solvency analysis, 46 2014–2016 4 5 FOREWORD Can gender-diverse businesses play a positive role in lifting a Importantly, our study offers concrete recommendations on ways country under significant economic and social duress? Lebanon to break down these barriers, with the ultimate goal of making continues to face tremendous dire economic and social impacts Lebanon’s companies stronger and more competitive by tapping from the Syrian crisis, now in its eighth year. According to gov- into the vast potential skilled women have to offer. ernment and independent sources, up to 1.5 million Syrians have taken refuge in Lebanon since the conflict erupted in March 2011, Our report is designed to be used in tandem with a similar study straining the nation’s public finances, service delivery, and other on the impact of women’s leadership for Egyptian companies, resources. The World Bank estimates that, as a result of the Syrian along with the earlier research on Jordanian firms. Together, crisis, some 200,000 additional Lebanese have been pushed into the findings from all three form a triangulation of a compelling poverty, adding to the nation’s 1 million poor. Meanwhile, more collection of evidence—of the immediate impact and long-term than 250,000 to 300,000 Lebanese citizens are estimated to have value that women bring to the boardroom. become unemployed, most of them unskilled youth. Ultimately, it is hoped that such efforts will help build a more Strengthening Lebanon’s private sector —creating jobs and oppor- robust private sector throughout the region, and in particular tunity— comes through understanding and addressing the factors within Lebanon, driving job creation, attracting new investment, that are hampering better company performance. Promoting expanding markets, generating new tax revenue to support crit- Gender-diverse businesses and increased women’s participation ically needed public services, and stemming the tide of poverty. on company boards and senior management are key element of this process. A growing body of research connects gender-diverse business leadership with stronger and more sustainable compa- nies—even during times of crisis. In the MENA region, IFC’s 2015 study in Jordan was the first of its kind to identify a strong and positive link between gender diversity, corporate governance, and company performance. This study, Women on Board in Lebanon: How Gender-Diverse Boards Bring Value to Lebanese Companies demonstrates the value of women’s presence in Lebanon’s business leadership and the ways in which female leaders, such as board directors, con- tribute to company success. It also shows some of the challenges women face as they aspire to positions of greater authority within Sanaa Abouzaid the corporate hierarchy. Regulatory and governance barriers, Corporate Governance Lead experience gaps, and societal gender preconceptions, make it Middle East and North Africa harder for women to ascend to the boardroom. ESG Sustainability Advice and Solutions Department 6 7 ACKNOWLEDGEMENT As part of its mission to create markets and opportunity, IFC is important feedback during the development of this report. The focused on closing gender gaps in the workplaces of emerging team also would like to thank the Lebanese League for Women in market companies, with a particular emphasis on efforts to bal- Business for sharing data on women in corporate structures and ance the scales when it comes to women in business leadership. offering first-hand insight into the challenges and opportunities This study, which explores the connection between gender-di- for Lebanese businesswomen. verse boards and company performance in Lebanon, is part of IFC’s ongoing effort to demonstrate the value of increasing Our appreciation extends to Voluntas Advisory for their efforts, women’s participation on company boards in the regions where as well as to the advisory board of this research study for their we work. By comparing measures of gender diversity and cor- valuable contributions: Ghina Achkar, Dr. Fida Afiouni, Elie porate performance, highlighting barriers to women’s ascension Aoun, Joelle Bou Abboud, Abir Chebaro, Cherine Debbas, Dr. into Lebanon’s boardrooms, and providing recommendations to Rasha El-Hassan, Badri El Meouchi, Chadia El Meouchi, Sahar reduce these barriers, it is hoped that this study will contribute Ghaddar, Sabine Hatem, Mona Itani, Abdallah Jabbour, Joyce to the knowledge base on the connection between gender-diverse Jammal, Dr. Charlotte Karam, Rania Mardini, Zeina Mhaidly, boards and enhanced company performance. Tania Moussallem, Rita Rizk, Joelle A. F. Rizkallah, Salma Sabra, and Asmahan Zein. This study was developed by a team led by Yehia El Husseiny, in cooperation with Linda Clark and Mohamed Sadek, as part of Additionally, we extend our appreciation to all the companies the IFC MENA Corporate Governance team, and in collabora- and individuals who participated in the focus group discussions, tion with Voluntas Advisory, whose consultants conducted the interviews, and surveys. The information received from these research. respondents was indispensable for the findings of the research. It builds on a similar study of Jordanian companies, published in Within the World Bank Group, the team thanks the reviewers: 2015. The earlier research showed that companies with greater Khawar Ansari, Alexandre Di Miceli, Sammar Essmat, Loty board gender diversity exhibit higher returns on assets and equity Salazar, Alexey Volynets, and Merima Zupcevic. Thanks to Ann compared to companies without gender-diverse boards, among Moline for editing support and to InfoDynamics for designing other advantages.1 the publication. The team would like to thank Excellence in Governance-Leba- non (EIG-L), a division of Tamayyaz, which provided valuable insights, facilitated access to data and information, and shared 1   International Finance Corporation. 2015. “Gender Diversity in Jordan: Yehia El Husseiny Research on the Impact of Gender Diversity on the Economic Performance of Corporate Governance Officer and Task Team Leader Companies in Jordan.” Washington, D.C. https://www.ifc.org/wps/wcm/connect/ Egypt and Levant e93318004a0d7ff195cfb7e54d141794/IFC_Jordan_Gender_Report_Sep_2015. pdf?MOD=AJPERE IFC ESG Sustainability Advice and Solutions Department 8 9 EXECUTIVE SUMMARY A growing number of studies show board gender diversity can positively affect a company’s financial and organizational performance. More specifically, studies have found that gender diversity in the Study concluded that 50% boardroom is associated with effects on key performance indicators such as profitability, innovation, and growth, as well as employee retention and engagement levels.2 Supported by this evidence, initi- atives to improve gender diversity in the boardroom have been undertaken globally. Yet despite such efforts, women are still underrepresented on boards across the globe, holding only 17 percent of all of sampled companies seats.3 Hence, there is tremendous opportunity to increase board gender diversity and, consequently, have female board to improve business performance. members, and women represent 14% The objective of this study in Lebanon is to contribute to a knowledge base that can be used as a foundation to raise awareness, to understand the current status of gender diversity within the corpo- rate world, and to further develop recommendations for concrete initiatives to close the gender gap in business leadership. of all board members. The report aims to: • quantify the relationship between gender diversity on corporate boards and a com- pany’s financial performance in Lebanon; “ • examine the barriers to female participation on boards and obstacles preventing optimal performance once in these positions; • highlight opportunities to increase the number of women in Lebanese boardrooms; Gender-diverse and boards lead to • propose recommendations on how to achieve greater gender equality in the board- stronger company room, build the pipeline of female business leadership talent, and promote more gender-equitable practices in the Lebanese labor market. performance, strengthens The study covered a sample of 1,600 Lebanese companies. The data was collected through an analysis of publicly available information and using the MASRI enterprise database. Additional companies’ information was gathered through focus groups and interviews with male and female board direc- organizational tors and executives, and through an online survey of companies. structures, and leads to improvements 2   Catalyst Information Center. 2012. “Why Diversity Matters;” Sangeeta Bharadja Badal. 2014. “The Business Benefits of Gender in the workplace Diversity” Gallup Business Journal. http://news.gallup.com/businessjournal/166220/business-benefits-gender-diversity.aspx; Diversity Best Practices. 2009. “The ROI of Diversity and Inclusion.” Diversity Primer. https://www.diversitybestpractices.com/sites/ diversitybestpractices.com/files/import/embedded/anchors/files/diversity_primer_chapter_02.pdf; Ingrid Dyott and Sajjad Ladiwala. environment and 2017. “Gender Impact: Assessing Gender Diversity at the Portfolio Level.”. 3   Meggin Thwing Eastman. 2017. “Women on Boards. Progress Report 2017.” https://www.msci.com/documents/10199/239004/ company culture. MSCI_Women+on+Boards+Progress+Report+2017.pdf/b7786a08-c818-4054-bf3f- ef15fc89537a. 10 11 Executive Summary Executive Summary The study found that the gender-diverse boards lead to stronger company performance, adding to reflect the marketplace—and, consequently, customer and investor needs. Such non-financial factors the business case for women on boards. The qualitative research reveals that the presence of women allow companies to make better financial decisions, operate more efficiently and cost-effectively, and on boards and in senior leadership strengthens companies’ organizational structures. Companies broaden their customer base. with women on their boards tend to adopt more sophisticated structures and implement a higher standard of governance practice. The presence of women on company boards can have a positive effect on the behavior of other board members. And greater gender diversity leads to improvements ORGANIZATIONAL AND HUMAN CAPITAL BENEFITS OF GENDER- in the workplace environment and company culture, which, in turn, positively affects employee DIVERSE BOARDS satisfaction levels, ultimately reducing turnover and the costs associated with training new hires. In addition to being associated with positive financial outcomes, board gender diversity is likely The study concluded that 50 percent of the sampled companies (see Research Methodology section) to enhance several organizational aspects of a company. Although classified as non-financial indi- 47% have female board members and women represent 14 percent of all board members. Furthermore, cators, these are factors that affect organizations’ performance over time. Therefore, they are of 47 percent have one to two female board members and 3 percent of the companies have three to four critical importance. female board members. The average board size is five members (5.1 for companies with women on boards and 4.8 for companies without women on boards). This study argues that maintaining gender-diverse boards can improve corporate governance and have one or two company credibility, due in part to a composition that better reflects the marketplace. Several con- female board members and nections were uncovered between the presence of women on Lebanese boards and strengthened 3% POSITIVE RELATIONSHIP BETWEEN GENDER DIVERSITY AND organizations. Female participation on boards results in a greater focus on corporate governance FINANCIAL PERFORMANCE structures and positively influences board dynamics, in turn improving company functioning and making them more attractive to investors. The study findings found that female board members appear to positively impact a company’s of companies have financial performance. The quantitative analysis revealed that Lebanese companies with gender-di- The inclusion of women on boards also appears to yield improvements in the workplace environ- three or more. verse boards outperformed those with all-male boards. On average, companies exhibited higher ment and company culture, leading to increased employee satisfaction and retention as well as a profitability measures and better solvency across the 2014–2016 period covered in this research. Spe- competitive advantage for attracting young and female talent. Furthermore, board gender diversity cifically, companies with female board members exhibited double the return on equity (20.7 percent may enhance market knowledge and innovation processes, driven by a richer variety of thought and compared to 10.3 percent for all-male boards), and 2.3 percent higher growth in return on assets. perspective that helps promote creative thinking. Furthermore, companies with gender-diverse boards displayed greater preference for equity financ- ing and less dependency on debt, as reflected in the equity-to-asset, debt-to-equity, and debt-to-asset BARRIERS FOR WOMEN ON BOARDS ratios. The average equity ratio for Lebanese companies with gender-diverse boards was 14.7 percent, compared to 2.8 percent for companies without women on their boards, across the three years of the The qualitative analysis underscored the obstacles for Lebanese women in gaining access to board study period. Additionally, companies with women on their boards had better solvency, reflected in positions. Interview, focus group, and survey respondents noted that Lebanese women are subject lower debt-to-equity and debt-to-asset ratios. to societal expectations about women’s roles from a very early age, as well as negative perceptions about women’s capabilities. Popular culture reinforces the stereotypes of women as homemakers and The assessment of the return on equity and return on assets was further broken down and analyzed men as leaders, they said. by the number of women in the boardroom. This showed that companies with two female board members had the highest return on equity, and those with one female on the board had the highest This leads to both conscious and unconscious gender biases that greatly inhibit women’s opportu- return on assets. nities and ambitions. Most Lebanese women receive little encouragement or support in pursuing advanced academic degrees in demanding fields, due to social, educational, familial and religious The findings of this study suggest that gender diversity is associated with better corporate financial constraints and expectations. This is especially the case in male-dominated sectors, where challenges performance. Yet, due to the relatively small sample size, as compared to the entirety of the Lebanese such as discrimination, marginalization and bias might be more prevalent. private sector, the statistical findings of this research are limited to the analyzed sample and cannot be extrapolated to the entire population of Lebanese companies. Such barriers are similar to those faced by women in other markets. Unique to Lebanon, though, are regulatory- and governance-related constraints that represent a significant obstacle for women aspir- The qualitative analysis, which was based on interviews, focus groups, and responses to an online ing to board seats on joint stock (S.A.L.) companies. Because the law requires that board directors questionnaire, highlighted important characteristics of female board members: sound economic and hold a minimal equity stake in the firm—allowing no provision for the appointment of independent strategic thinking excellence in problem-solving skills, and exceptional ability to identify profitable directors—only those individuals with sufficient assets are eligible. This puts women at a disadvan- deals. The study findings showed that such attributes yield significant benefits for companies, in the tage, since they typically own fewer capital assets than men. The situation is exacerbated in some areas of risk management, planning and strategic direction, in particular. Diverse boards also better firms as a result of company by-laws or informal agreements with other board appointees. 12 13 Executive Summary Executive Summary Even for women who make it onto corporate boards, there is still the question of actual influence • Public awareness and female empowerment: This starts early and includes educating children wielded. In many cases, women end up performing perfunctory roles instead of decision-making equally to reduce bias. Popular media can be an important tool to push back against ingrained ones. A large proportion of women on company boards in Lebanon inherited their share from a and negative stereotypes about women’s roles. Other efforts include raising public awareness family member, which reinforces this dynamic. about women’s capabilities and the business case for gender- diverse boards, creating women’s networks for support and encouragement, providing women-only training, and increasing the However, study participants noted that even highly qualified female board members experience visibility of qualified female board candidates. marginalization and enjoy less authority and executive power. They struggle against stereotypes and often receive limited respect from their peers. They said this challenge is even more difficult to • Reshaping companies from the inside out: This includes engaging with male leaders to gain overcome when a board has only one or two female members. their support and public advocacy, encouraging companies to commit to gender diversity initi- atives internally and among their peer firms, providing mentoring and coaching to cultivate the Another constraint identified in the study is an experience gap. Because women are comparatively female talent pool, and implementing formalized women-friendly policies and procedures that late entrants into Lebanon’s formal labor market, they remain underrepresented in some sectors. As enable more women to remain in the workforce while they raise families. a result, they may have less experience than their male peers. To be sure, some of these recommendations are aimed at improving the gender balance of the Leb- Still, this gap is narrowing as more women participate in Lebanon’s workplace. Over time—and if anese workforce as a whole. Still, a more balanced workforce will contribute to an expanded pool broader efforts to balance the gender scales are successful—study participants said the pipeline of of talented and experienced women who could qualify for board positions. Study participants noted female talent will deepen naturally and women’s experience levels will reach parity with their male that connecting senior female leaders with high-potential businesswomen in networks also is essen- peers in many industry sectors. tial in this effort, since personal connections tend to factor into boardroom advancement in addition to skills and talent. ACCELERATING THE PACE OF CHANGE COMPARISON OF RESULTS FROM THREE COUNTRIES: LEBANON, As part of our analysis, we identified a notable generational shift taking place in Lebanon. Young EGYPT, AND JORDAN 42% women are pursuing educational opportunities in greater numbers than ever before, with about 42 percent earning university degrees. Of note, more Lebanese women than men continue their educa- With the completion of similar analyses in three countries—Lebanon, Egypt, and Jordan—a tions past secondary school. And many more are opting for corporate careers, although as of 2017, regional picture begins to emerge. It is clear that gender-diverse boards of MENA companies can only about 29 percent of Lebanese women are in the labor force.4 improve corporate governance, positively influencing board dynamics and making companies more of young females attractive to investors and that the presence of women on boards enhances the workplace environ- earn a university The uptick in numbers of women entering the professional workforce has not yet positively impacted ment, reduces employee turnover, and contributes to a stronger focus on innovation—all of which degree 29% the ranks of senior management or boards, since such leadership positions typically are held by strengthen companies over the long term. older and more experienced candidates. Over the long term, these generational shifts will naturally contribute to a more gender-diverse workforce. The challenges faced by women in the three countries are similar as well. In recent years, women in all three nations have increased access to a wider range of opportunities. Yet gendered stereotypes participate in the While the generational shift is positive, taken alone, it is unlikely to fully close the gender gap— persist. It will require concerted effort and a host of actions to bring about the changes needed so labor force. particularly with regard to senior leadership. Concrete action is needed to harness the untapped that MENA women can achieve positions of leadership in similar numbers to their male peers. potential that comes with increasing the presence of women in Lebanon’s business leadership— improved corporate governance, enhanced firm performance and increased sustainability, leading to job creation and, ultimately, broader economic growth. Study participants identified actions in three key areas: • Corporate governance and transparency: Create incentives for better overall governance, with a particular focus on board dynamics and functioning, as well as on more extensive public disclosure of non-financial information, such as gender composition of the workforce, senior management corps, and board. 4   Rubina Abu Zeinab-Chahine. “Lebanese Women and the Dynamics of Change.” The Daily Star Lebanon. January 11, 2017. https://www.pressreader.com/lebanon/the-daily-star-lebanon/20170111/281526520742335, accessed 12/3/18 14 15 1. INTRODUCTION A growing number of studies show that a gender-diverse board can have a positive impact on company performance. More specifically, studies have found that gender diversity in the board- Companies with room is associated with positive effects on key performance indicators—profitability, innovation, gender diverse growth—along with enhanced internal controls, stronger organizational structures, and higher executive committees have 47% employee retention rates and engagement levels.5 A 2016 OECD report showed that companies with gender-diverse executive committees outperformed those without women in senior-level positions, achieving an average of 47 percent higher return on equity (ROE) and 55 percent greater gross income.6 Similarly, a 2011 Catalyst study found that companies with the most female board directors outperformed those with the fewest.7 higher return on equity (ROE) and 55% Beyond the positive company-level impacts observed when firms have more gender-equitable lead- ership, the evidence suggests that greater gender equality in the general workforce boosts overall economic growth by improving productivity, diversifying labor markets, advancing corporate gov- ernance, and increasing human potential. The overall gap between male and female labor force greater gross income. participation, although narrowing, remains stark: Only 49 percent of women participate in the labor force globally, compared to 76 percent of men.8 Eliminating such gaps to achieve full gender parity throughout the workforce and at the top could increase GDP by $12 trillion globally and $0.6 Reaching gender trillion in the MENA region alone by 2025, according to a 2015 McKinsey study.9 parity by 2025 could increase GDP Supported by this evidence, initiatives to improve gender diversity in the boardroom have been undertaken globally, regionally, and within Lebanon. For instance, Excellence in Governance-Leb- anon (EIG-L) and the Lebanese League for Women in Business (LLWB), in partnership with IFC, $0.6 are launching Women on Boards and in Business Leadership training program. Aimed at businesses, professional organizations, academic institutions, and individual male and female business leaders, trillion the program focuses on building Lebanon’s female leadership pipeline. It enfranchises male leaders in the MENA region while energizing and empowering women, with the goal of helping companies maximize the benefits alone. 5   Catalyst Information Center. 2012. “Why Diversity Matters"; Sangeeta Bharadja Badal. 2014. “The Business Benefits of Gender Diversity.” Gallup Business Journal, http://news.gallup.com/businessjournal/166220/business-benefits-gender-diversity.aspx; Diversity Best Practices. 2009. “The ROI of Diversity and Inclusion.” Diversity Primer, www.diversitybestpractices.com/sites/ diversitybestpractices.com/files/import/embedded/anchors/files/diversity_primer_chapter_02.pdf; Ingrid Dyott and Sajjad Ladiwala. 2017. “Gender Impact: Assessing Gender Diversity at the Portfolio Level.” Neuberger Berman. 6   Deloitte. 2016. “Women in the Boardroom: A Global Perspective,” Deloitte Global Center. 7   Catalyst. 2011. “The Bottom Line: Corporate Performance and Women’s Representation on Boards (2004-2008).on average, than other companies. In this report, Catalyst used three measures to examine financial performance: return on sales (ROS” 8   World Bank. 2017. “Labor Force Participation Rate, Female (% of Female Population Ages 15+) (Modeled ILO Estimate); International Labour Organization. 2017 “Labor Force Participation Rate, Male (% of Male Population Ages 15+) (Modeled ILO Estimate),” ILOSTAT Database. 9   McKinsey&Company. 2015. “The Power of Parity: How Advancing Women’s Equality Can Add $12 Trillion To Global Growth.” 16 17 1. Introduction Introduction 1. of a gender-diverse leadership team. And in October 2016, the Lebanese League for Women in Busi- Consequently, improving board performance has become a primary focus of corporate governance ness launched the Women on Board initiative, with the goal of increasing by 30 percent the number initiatives in recent years, with several studies making connections between effectively functioning of women on Lebanese boards by 2025. Multiple economic agencies and associations, along with 21 boards and better performance.13 companies, have signed on to this initiative, including the Lebanese Businessmen’s Association, and the Chamber of Commerce, Industry and Agriculture of Beirut and Mount Lebanon.10 Other studies have shown that women in decision-making positions such as board directorships tend to focus more on key aspects of corporate governance, with heightened attention to board processes, Figure 1.1  Women’s compliance, internal controls, and transparency, helping to elevate the overall governance culture.14 representation on WHY CORPORATE GOVERNANCE MATTERS AND THE CONNECTION Researchers also have suggested that boardroom gender composition can significantly influence boards, as % of total WITH GENDER-DIVERSE BUSINESS LEADERSHIP financial and organizational performance.15 Specifically, the presence of women on boards has pos- board directors itive impacts on innovation, growth, and employee retention and engagement. Further evidence Often, such initiatives are part of broader efforts to improve corporate governance—the structures suggests that gender-diverse boards and improved financial performance are positively correlated,16 and processes by which companies are directed and controlled. Research has shown that, along and that companies with gender-diverse management teams and boards achieve better financial 17% with stronger environmental and social standards, good corporate governance enhances companies’ results on average than companies with homogeneous management and boards. For example, a 2016 performance, helping them operate more efficiently, improve access to capital, mitigate risk, safe- OECD report showed that companies with gender-diverse executive committees outperformed those GLOBALLY guard against mismanagement, increase stakeholder confidence, and strengthen reputation. Good without women in senior-level positions, on average achieving 47 percent higher returns on equity governance makes companies more accountable and transparent to investors and gives them the and 55 percent higher gross income.17 Similarly, a 2011 Catalyst study found that companies with tools to respond to stakeholder concerns. In fact, a number of studies have shown that investors are the most female board directors outperformed those with the least.18 more likely to select companies with sound corporate governance structures.11 A recently published paper by two academics, Alexandre Di Miceli and Angela Donaggio, codifies Corporate governance also contributes to development. Increased access to capital encourages new the existing body of recent research, revealing substantial evidence connecting increased diversity 20% investments, boosts economic growth, and provides employment opportunities. In fact, over the at the top with enhanced environmental, social, and governance (ESG) standards. The authors past decade, an estimated $4.5 trillion in project finance across emerging markets has adhered to identified equally strong evidence connecting better ESG with stronger corporate performance, DEVELOPED MARKETS IFC’s performance standards and corporate governance methodology–or principles inspired by this building a comprehensive business case for the value of women’s participation on boards and in guidance. The adoption and application of these standards is evidence of a broad-based acknowl- senior leadership.19 edgement that governance considerations, along with environmental and social standards,  are central to business and economic success. THE GENDER GAP AT THE TOP AND WHAT IT MEANS FOR ECONOMIES AROUND THE WORLD 10% ROLE OF THE BOARD Yet, despite the ever-strengthening business case for gender-diverse boards in recent years and some EMERGING The board of directors is the central corporate governance organ of a business enterprise, simulta- notable gains—the period between 2010 and 2016 saw a 54 percent global increase in women MARKETS neously directing the financial and non-financial performance of the company. Boards play a vital on boards— women are still underrepresented on boards across the globe (figure 1.1), holding role in corporate governance by setting the strategic direction of a company and ensuring that the only 17 percent of all board seats.20 While 73 percent of companies globally have at least one female right talent is in place to manage the business. They exert influence throughout business operations, board member, only 20 percent have three or more women on their boards—considered the critical providing advice and counsel, and playing a key role in succession planning, conflict resolution, mass needed for women’s voices and perspectives to be heard. 21 2% networking, strategy development, and managerial oversight. They also have responsibility for implementing optimal organizational governance and ensuring the alignment of interests between managers and shareholders. 12 MIDDLE 13   See: McKinsey&Company. 2018. “A Time for Boards to Act." EAST 14   See: Isidro and Cobral. 2015. “The Effects of Women on Corporate Boards on Firm Value, Financial Performance, and Ethical and Social Compliance.” Journal of Business Ethics. Vol. 132, no. 1: 1–19. 15   Voordeckers, Van Gils, and Van den Heuvel. 2006. “Board Composition in Small and Medium Sized Family Firms.” Journal 10   Lebanese League for Women in Business. 2016. “Women on Board.” www.llwb.org/single.aspx?a=2019&z=14. of Small Business Management. Vol. 45, no. 1: 137–56; IFC. 2015. “Gender Diversity in Jordan: Research on the Impact of Gender 11   See: Deloitte Governance Services and Nyenrode Business Universiteit. 2016. “Good Governance Driving Corporate Performance? Diversity on the Economic Performance of Companies in Jordan.” A Meta-Analysis of Academic Research & Invitation to Engage in the Dialogue;” Flavianus Benedicto Ng’eni. 2015. “The Corporate 16   Victoria-Octavian Mülller. 2014. “The Impact of Board Composition on the Financial Performance of FTSE100 Constituents,” Governance and Firm Performance : A Review of Existing Empirical Evidence,” European Journal of Business and Management, Vol. Procedia - Social and Behavioral Sciences Vol. 109 : 969–75; Catalyst Information Center. “Why Diversity Matters; ” Dyott and 7, no. 33; Joseph A Mccahery, Zacharias Sautner, and Laura T Starks, “Behind the Scenes : The Corporate Governance Preferences of Ladiwala. “Gender Impact: Assessing Gender Diversity at the Portfolio Level; ” IFC. 2015. “Gender Diversity in Jordan: Research on Institutional Investors,” 2015; Laura Starks, 2009. ‘Corporate Governance and Corporate Social Responsibility: What Do Investors the Impact of Gender Diversity on the Economic Performance of Companies in Jordan.” Care about? What Should Investors Care About?’” Keynote speech for Eastern Finance Association;. Ammann, M., Oesch, D., 17   Deloitte, “Women in the Boardroom: A Global Perspective,” Deloitte Global Center, 2016. Schmid, M. 2011. “Corporate Governance and Firm Value: International Evidence.” Journal of Empirical Finance. 18: 35-55. 18   Catalyst, “The Bottom Line: Corporate Performance and Women’s Representation on Boards (2004-2008),” 2011.on average, 12   Wim Voordeckers, Anita Van Gils, and Jeroen Van den Heuvel. 2007. “Board Composition in Small and Medium Sized Family than other companies. In this report, Catalyst used three measures to examine financial performance: return on sales (ROS Firms.” Journal of Small Business Management. Vol. 45, no. 1: 137–56; Organisation for Economic Co-operation and Development. 19   Alexandre Di Miceli and Angela Donaggio. “Women in Business Leadership Boost ESG Performance: Existing Body of Evidence 2006. “Corporate Governance of Non-Listed Companies in Emerging Markets;” Maher and Andersson. 1999. “Corporate Makes Compelling Case. IFC Private Sector Opinion 42. December, 2018. Governance: Effects on Firm Performance and Economic Growth.” In Convergence and Diversity in Corporate Governance Regimes 20   Meggin Thwing Eastman. 2017. “Women on Boards. Progress Report 2017.” MSCI. and Capital Markets. 21   Linda-Eling Lee et al. 2015. “Women on Boards: Global Trends in Gender Diversity on Corporate Boards,” MSCI Research Insights. 18 19 1. Introduction Introduction 1. above the 23.3 percent MENA average. In Egypt and Jordan, only about 16 percent of companies Figure 1.2  Regional overview: Women’s participation in senior include females as among principal owners.23 Worldwide, about 35 percent of businesses are wom- business leadership in MENA en-owned, according to the World Bank. Aside from the moral imperative of fairness, not giving voice and decision-making authority to fully half the world’s population means losing out on a massive well of talent. A 2017 report from the World Economic Forum identifies a 42 percent average global gender gap that must be closed in 4.4% order to reach full gender equality. The report notes that making even small inroads in closing these 23.3% 43.5% gaps could quickly yield strong results—increasing countries’ gross domestic product by $5.3 trillion Firms with female ownership 5.4% in the next seven years.24 Female senior executives Hence, there is great potential for increasing board gender diversity and a strong case to be made that by accelerating the pace of women’s ascension to boards, individual businesses and economies as a whole will experience improvements. 15.7% 2.4% Figure 1.3  Closing the gender gap: How long it will take to achieve gender parity in different regions25 Globally the gender gap can be closed in 100yrs 16.1% 157 yrs Middle East & 168 yrs 7.1% North Africa North America 61 yrs The Middle East and North Africa region lags well behind: As a group, women constitute less than Western Europe 2 percent of all board members, while only 17 percent of corporate firms have female representation in the boardrooms.22 The data collected on the number of firms in the MENA region with women in top management—a stepping stone to board appointments—is equally striking. In 2013, only 5.4 percent of firms had female senior leaders. At that time, 4.4 percent of Lebanese companies had appointed women to senior leadership positions. For intra-regional comparison, 7.1 percent of companies in Egypt and 2.4 percent of Jordanian companies included women in their senior leadership teams (figure 1.2). In 128 yrs the category of female business ownership, the numbers are stronger: In Lebanon, women partici- Eastern Europe & pate as part of the principal ownership block in 43.5 percent of privately-owned companies—well Central Asia 23   World Bank. 2017. “Firms with Female Participation in Ownership,” Data Bank Gender Statistics.   Deloitte. “Women in the Boardroom: A Global Perspective;” Shareholder Rights and Euromena Funds. 2016. “Women 22 24   World Economic Forum. 2017. “The Global Gender Gap Report 2017.” Representation on Boards of Directors on MENA Exchanges.” 25   Ibid. 20 21 1. Introduction Introduction 1. LEBANON’S CORPORATE GOVERNANCE CONTEXT As noted earlier, a number of initiatives also are underway to promote the cause of women in Leb- anon’s business leadership, even though there are no formal regulations to require gender diversity 8.4% of all Lebanese As with other countries in the region, the implementation of corporate governance practices in Leb- on corporate boards. executives, anon has been slow. This is due in part to the make-up of the typical Lebanese firm: The majority including legislators, are family-owned and often have limited capacity to implement strong corporate governance stand- senior officials and THE STATUS OF WOMEN IN LEBANON managers are women ards. 26 As a result, the development of corporate governance in most Lebanese industries remains at the early stage. One exception has been Lebanon’s banking sector, which has made considerable progress on the corporate governance front. On-going regional instability has directly affected Lebanon’s political, social and economic landscape. 8.4% In turn, this situation has limited progress toward gender equality and women’s empowerment.29 In recent years, there has been an effort to improve corporate governance in Lebanon’s private and public sectors by applying international codes and practices. With banks leading the way, many other Today, Lebanon ranks 137th out of 144 countries in the World Economic Forum’s 2017 Global Lebanese institutions, including some telecom and real estate companies, are adopting best practices Gender Gap Index, and 133th on the Economic Opportunity and Participation sub-index.30 The labor and gradually putting into place sound corporate governance structures. These firms understand market in Lebanon is characterized by low employment, a limited degree of economic contribution that such initiatives can attract investors, consumers, and new generations of talent. by women, a large informal sector, a high influx of foreign workers, and a large number of skilled Lebanese seeking and obtaining employment abroad.31 The Central Bank of Lebanon (Banque Du Liban, BDL) is the only regulatory body in Lebanon that is trying to foster good corporate governance practices across the banking sector. Early in 2006, Lebanon’s labor law requires that men and women in the same position must receive the same 30% BDL issued a circular mandating basic corporate governance requirements, followed by a longer list remuneration. Yet, according to the Institute for Women’s Studies in the Arab World, this law is not General average of provisions in 2008 detailing board structure and composition, board committees, and internal reflected in practice, meaning that a fair degree of wage inequality exists in the Lebanese workplace.32 auditing. In 2017, BDL required all banks to develop a board succession plan, to be proposed to the General Assembly. The plan needed to include protocols for the end of a board member’s term or in The lack of policies—and weak enforcement of laws already on the books—creates challenges and the event of a board vacancy. It also required board members to participate in corporate governance barriers for working women, especially in the informal sector. As noted earlier, women account for training at least once a year. less than 30 percent the total Lebanese labor force today, with only a slight increase in participation Women rate since 2010.33 constitute 47% Although no official agency exists for overseeing corporate governance, several supervisory and regulatory authorities issue governance rules for specific industries. In addition, a number of non- As a middle-income nation compared to other countries in the region, Lebanon’s female labor force governmental organizations support the creation of corporate governance principles as part of their participation is on the higher end of the spectrum. However, a range of additional impediments— agendas. For instance, the Lebanese Transparency Association and Lebanon Corporate Governance including cultural and societal norms that perpetuate gender-based stereotypes—make it difficult Task Force partnered with other groups to develop the Lebanese Code of Corporate Governance. for women to remain in the workforce and move up the corporate ladder, causing considerable of the Lebanese This code, intended as a flexible guide for companies wishing to improve corporate governance, lays underrepresentation in senior-level positions. Information from 2007—the most recent year for banking sector. Their out principles and practices designed to improve the overall quality of governance for Lebanon’s which data on gender diversity at the management level in Lebanon was available—reveals that highest contribution corporate boards, with the goal of enhancing company performance, competitiveness, and access to women account for only 8.4 percent of all Lebanese executives, a category that includes legislators, across all sectors. capital. 27 Adaptation of the code is voluntary and there are no incentives associated with implement- senior officials and managers. By contrast, in that same year, more than half of the countries for ing the code’s principles. Still, the Lebanese Transparency Association reports an uptick in interest which data was available reported that women constituted over 30 percent of their management 81% from family-owned and listed companies alike. Many are requesting assistance in implementing cadre.34 While public statistics on the number of female board members in Lebanon do not exist, governance upgrades, in the form of corporate governance assessments, guidelines. women as a group constitute 13 percent of all Lebanese joint stock company board members.35 Lebanon’s rank in protecting minority investors stands at 138 out of 190 countries in the World of 61 female mid- Bank’s 2018 Doing Business Report.28 The extent of shareholder governance remains low (3.3) and senior level bankers the country’s transparency score is 5.0.  who participated in in 29   William R. Avis. 2017. “Gender Equality and Women’s Empowerment in Lebanon,” Knowledge, Evidence and Learning for the study have worked Development. at their financial 30   World Economic Forum. 2017. “The Global Gender Gap Report 2017.” institution for more   European Training Foundation. 2011. “Lebanon: Country Strategy Paper 2017-2020.” than 10yrs. 31 26   Nasser Saidi. 2004. “Corporate Governance in MENA Countries: Improving Transparency and Disclosure.” Presentation for The 32   Institute for Women's Studies in the Arab World. 2016. “Gender Profile Lebanon.” Second Middle East and North Africa Regional Corporate Governance Forum. The Lebanese Transparency Association. 33   Crowe Horwath. 2015. “Country by Country Financial Reporting and Auditing Framework Lebanon.” 27   Nada AbdelSater-AbuSamra and Norman D. Bishara. 2006. “The Lebanese Code of Corporate Governance.” 34   Crowe Horwath. 28   World Bank. 2018. “Doing Business 2018: Reforming to Create Jobs.” Flagship report, 15th edition. 35   Khalil Masri et Fils Sarl and Kompass Lebanon Sarl. Enterprise Database. http://masri.com.lb/. 22 23 1. Introduction A breakdown of the data per industry shows that female labor force participation is highest in bank- ing and service sectors. Yet while female employees accounted for 47 percent of the total Lebanese banking sector as of 2017, women’s participation at the board level remains low: most women in banking work at entry- or mid-level positions.36 Of note: among the 61 female middle- to senior-level bank managers who participated in this study, 81 percent said that they had worked at their financial institution for more than 10 years. Taken together, these findings suggest that career advancement beyond middle management is a lengthy and challenging process for Lebanese professional women. ABOUT THE STUDY This study explores the impact of gender-diverse boards and the performance of Lebanese compa- nies. The first part of the analysis identifies and quantifies the relationship between gender-diverse boards and company financial performance. The second aspect of the analysis looks at the ways in which the presence of women on boards affects company operations, including such non-financial but equally important indicators as corporate governance, board dynamics, employee satisfaction, innovation, and talent retention. The study then details some of the barriers to women’s access to Lebanese board directorships and to their ability to perform well in these positions. Next, it identi- fies opportunities and recommendations on how to achieve better gender balance in the boardrooms of Lebanese companies and ultimately advance the broader case for gender equality in Lebanon’s labor market. The report concludes with a brief comparison of the board gender diversity situation in three MENA countries: Lebanon, Egypt, and Jordan. The report builds on IFC’s 2015 study of 1,200 Jordanian firms, which was the first to analyze in-depth the role of women on boards in that country and the link between gender-diverse boards and company performance. The Jordanian research revealed that despite a limited presence in boardrooms—only about 23 percent of companies had female board directors—when they are present, they have a beneficial influence on performance, with positive correlations between gen- der-diverse boards and returns on assets and on equity. 37 With the completion of similar analysis in three countries—Egypt, Jordan, and Lebanon—the reports will contribute to a robust knowledge base that takes into account the unique characteristics of individual countries as well as the MENA region as a whole, contributing to the business case for better gender balance in MENA boardrooms. 36   Rubina Abu-Zeinab-Chahine. “Lebanese Women and the Dynamics of Change.” The Daily Star Lebanon, January 11, 2017. 37   IFC. 2015. “Gender Diversity in Jordan: Research on the Impact of Gender Diversity on the Economic Performance of Companies in Jordan.” 24 25 2. RESEARCH METHODOLOGY Figure 2.1  A statistical analysis of Lebanese companies looked at the correlation between gender-diverse boards and company performance Return on Equity Return on Assets Return on Sales Gross Margin Profit Growth Better Financial Equity Ratio Performance Board Gender Debt-to-Equity Ratio Diversity Debt-to-Assets Ratio Employee Satisfaction, Retention & Attraction Board Dynamics CSR & Innovation Better Organizational Structures This research study examines the impact of gender-diverse boards—the independent variable—on the performance of companies–the dependent variable. To expand on and enhance the findings from the quantitative methods, qualitative research methods were deployed, including focus groups, interviews, and a survey. The results from the qualitative research helped to reinforce the results of the quantitative analysis. SAMPLE SIZE AND CHARACTERISTICS The analysis focused on S.A.L. (joint stock) companies, with observations spanning a three-year period (2014, 2015, and 2016). The study sample includes a total of 1,600 Lebanese companies. After data collection, validation, and exclusion of outliers from the data set, the quantitative and the qualitative analysis attested a total of 393 companies. The sample included in this research study had 50 percent of the companies with women on their boards and women represent 14 percent of all board members. The average board size is five mem- bers (5.1 for companies with women on boards and 4.8 for companies without women on boards) and board sizes range between 3 and 13 members. The number of female board members on the gender-diverse boards ranges from one to four. Out of the total sample, 47 percent have one to two female board members while only 3 percent have three to four female board members. For 41 percent of companies in the sample, female representation in the boardroom ranges between 1 and 49 percent while 9 percent have a board composition that ranges from an equal mix of men and women to all women. Due to the small sample size, and in order to ensure a comparable sample, the companies with women on their boards and those with all-male boards are distributed evenly across the four main sectors analyzed in the sample. 26 27 2. Research Methodology Research Methodology 2 North Lebanon 49% 2% 2% Research was conducted on the Sectoral distribution of following breakdown and sample: Lebanese companies 1,600 Sample size 97% Beirut & Mount Lebanon Estimated population Sample 35% 29% 95% 23% 24% 393 Quantitative analysis 1% 1% Bekaa 15% 13% 4% 5% 348 2% 1% 2% Geographic distribution of Lebanese companies 0% Agriculture & Manufacturing Construction & Trade Financial Services Private companies South Lebanon 1% Mining Utilities Services “ Board gender diversity in Lebanese industry sectors 45% 47% Manufacturing (n=45) 55% Trade (n=20) This research study examines the impact of gender-diverse boards - independent 44% variable - on the performance of companies - Finance (n=45) Services (n=66) 45% dependent variable, using both quantitative 55% 56% With women and qualitative methods. No women 33% 8% 1% 0% 1-24% Interviews conducted Participation breakdown 45 14% 6 Preliminary interviews 25-49% with females in various Focus groups, interviews, roles (CEOs, founders, etc.) Women age online survey 50-74% Range of women’s range 27-53 2% representation on 50% 75-100% 4 25% Lebanese company Board Members boards Individual interviews with female board members Senior Management 1% 55% 4 of companies Men age 16% range 25-57 had no women Company interviews with Women’s representation on on their boards senior management boards of Lebanese companies 28 29 2. Research Methodology Research Methodology 2 SECTORAL DISTRIBUTION DATA COLLECTION Data on the total number of companies with boards in Lebanon is not available.38 Using informa- The following instruments were used for data collection: tion from the MASRI Enterprise Database, four main sectors were identified for analysis: finance, manufacturing, services, and trade. Compared to the estimated population, the selected sample displays similar variance in sectoral distribution. The finance sector is overrepresented compared to Desk research the overall number of companies, in large measure because bank data is publicly available and there- The data was pulled on 46 companies and banks, looking at corporate governance structures, fore easier to access than information on firms in other sectors. Agriculture and mining companies financial performance, and the status of women within these firms. The data was gathered from are not included in the sample, based on the assumption that very few of them maintain functional annual reports and income statements provided by Bankdata Financial Services. Some banks were boards. excluded, due to the lack of publicly available information. Since most S.A.L. companies are registered in either Beirut or Mount Lebanon, the sample focused only on firms located in these regions. This yields a representative cross-section of Lebanese compa- MASRI Enterprise Database 39 nies with operational boards. This database provides detail on financial indicators as well as on board composition, from which 300 companies were identified for the analysis and selected on the basis of: COMPANY PERFORMANCE INDICATORS • Existence of a board of directors The financial indicators included in the quantitative analysis are return on equity (ROE), return on • Minimum of 50 employees—to capture a sample of firms in which corporate governance- assets (ROA), return on sales (ROS), equity ratio (ER), debt-to-equity ratio (D/E) and debt-to-asset related areas such as board composition would have more significant impacts ratio (D/A). ROE, ROA and ROS represent profitability measures, while ER, D/E and D/A reflect capital structure and solvency. • Representative of a cross-section of industry sectors Capital structure can be an important indicator of the claims that various stakeholders have on the company. It also offers insight into a firm’s risk profile. The optimal risk level depends on the Face-to-face interviews industry but, generally, a company with higher debt financing faces greater fixed obligations and Preliminary interviews were conducted with six female managers. These interviews helped create a would experience less operating buffer and more risk, which may indicate higher financing costs framework for the analysis, identify gaps and establish data collection needs. For additional insights depending on the cost of capital in the industry. While capital structure indicators do not directly into the status of women on boards in Lebanon, eight more interviews were conducted with four reflect economic performance of companies, when taken together in comparison with other firms, female board directors and four senior company managers. Questions focused on identifying barri- they can provide an overall understanding of the financial performance and health of the companies ers preventing more women from joining boards and opportunities to accelerate the pace of gender analyzed. equality in boardrooms. In the interviews, female directors shared their experiences in detail, con- tributing to a richer analysis. The company interviews added valuable insight on gender diversity and The qualitative analysis included non-financial indicators to measure improved organizational gender biases in the workplace. The number of interviews was determined by resources available and structures: corporate governance, board dynamics, employee satisfaction, innovation, and talent time and methodological considerations. Participants were offered anonymity and some names are retention. omitted in the report. Focus group discussions 38   By law in Lebanon, only three corporation types are required to have a board of directors: joint stock companies (S.A.L.), holding Five focus group discussions were convened —each with a different audience—which helped to pro- companies, and offshore companies. These three company types also are required by law to register with the Beirut Stock Exchange vide a broader perspective. Participants represented the range of stakeholders from firms of varying (BSE). They are considered members of the BSE even if the corporation is not listed on the BSE. The other types of companies are: limited liability companies (S.A.R.L.), partnerships, and partnership limited by shares. They are not required to have a board of sizes, sectors, and regions of the country. Two sessions included male board members and senior directors but can appoint a board or a group of partners with similar roles and responsibilities at their own discretion. For all company types, the Lebanese law states that separating the board of directors from senior management is not required. The chairperson is the de facto general manager. If an alternate general manager is appointed, this individual operates under the responsibility of the chairperson.   For more information on Masri, please refer to http://masri.com.lb/. 39 30 31 2. Research Methodology Research Methodology 2 executives, while three included female board members and senior executives (figure 2.8). The sepa- ration by gender was purposeful: The goal was to allow a comparison of the perceived barriers and opportunities for women on boards between male and female respondents. Number and size of the discussion groups were determined by a balance between available resources, time, and a structured methodology, as well as the availability of participants. Participants were offered anonymity and some names are omitted in the report. Online survey To collect as much information from as wide a range of firms as possible, an online survey was circu- lated to 1,207 Lebanese companies. The response rate to the online survey was very low, and where valid financial information was available, the responses were integrated into the analysis. RESEARCH LIMITATIONS As with any fact-based research, there are some limitations to this study. It was not possible to determine the effectiveness of the sample companies’ overall corporate governance—and whether or not their boards play a significant role in company functioning. This was the reason for limiting the sample to only those firms with at least 50 employees. The presumption here was that an effective board of directors would be significant to companies of this size or larger. In addition, although the quantitative analysis shows relevant differences in financial performance between companies with women on their boards and those with all-male boards, it is not possible to establish causality between the variables. This is a key reason to supplement the quantitative findings with the qualitative research to gain further insight into the relationship between the presence of women on boards and the impact on company performance. The data on the total number of companies with boards in Lebanon is not available, meaning that a definitive number could not be established. While resource constraints limited the sample size, measures to ensure a robust and representative sample of companies with functioning boards in Lebanon. For instance, smaller sectors were omitted. The financial data collected for this research study reflects companies’ annual statements; however, this information has not been verified by any third party. Additional steps were taken to ensure reliability by identifying firms reporting unlikely financial results and excluding these outliers from the analysis. Finally, in order to develop a comparative analysis between companies with and without women on their boards, an intentional sampling process was deployed to obtain a 50-50 split among firms, rather than using a truly random sampling process. Consequently, the sample might not reflect the overall population of companies. While it does capture a snapshot of the Lebanese business context, it would not be valid to use the descriptive insights from the sample, such as percentage of women on boards, as a general representation of all Lebanese companies. 32 33 “ When it comes to investments, having a woman 3. ANALYSIS: HOW WOMEN ON BOARDS IMPACT THE FINANCIAL crunching PERFORMANCE OF LEBANESE the numbers will ensure COMPANIES more realistic expectations and that the deal will be profitable.” Female board member of a Lebanese company The quantitative analysis of the Lebanese companies reveals positive correlations between the pres- ence of women on boards and financial performance. The analysis looks at profitability measures, capital structure, and solvency to create a wholistic representation of company performance. The quantitative analysis also reveals that companies with women on their boards have more prudent capital structures. The statistical results align with the conclusions from multiple studies conducted in recent years, including IFC’s 2015 study of Jordanian firms—that companies with gender-diverse management teams and boards outperform companies with more heterogeneous teams.40 The input provided by the qualitative data gathered through focus groups, interviews, and the online survey corroborates the quantitative findings on profitability indicators. Respondents—including senior managers and board members of Lebanese companies—indicated that female board members excel at thinking strategically, solving problems, and identifying profitable deals. Company repre- sentatives interviewed observed that gender-diverse boards are able to addresses market, customer, and investor needs in optimal ways, even as they understand how to manage investors’ expectations. This also allows companies to make better financial decisions, operate in more efficient and cost-ef- fective ways, increase stakeholder satisfaction, and broaden their customer base.   See: Catalyst. “The Bottom Line: Corporate Performance and Women’s Representation on Boards (2004-2008);”on average, than 40 other companies. In this report, Catalyst used three measures to examine financial performance: return on sales (ROS IFC. 2015. “Gender Diversity in Jordan;” and Morgan Stanley. 2016. “The Gender Advantage.” 34 35 3. Analysis: How Women on Boards Impact the Financial Performance of Lebanese Companies Analysis: How Women on Boards Impact the Financial Performance of Lebanese Companies 3. The assessment of the return on equity and return on assets was further broken down and analyzed by the number of women in the boardroom, it is evident that companies with two female board Figure 3.1  Profitability measures for Lebanese companies No women members had the highest return on equity, and those with one woman on the board had the highest With women return on assets. Companies with four women on their boards had the same performance in return on equity as their peers of companies with all-male boards (figure 3.2). On the other hand, compa- nies with one or more women on their boards had higher returns on assets, and those with three 20.5% 20.7% female board members had the same performance as companies without women on their boards. 14.6% 14.7% 12.5% 12.7% 10.3% 8.5% 8.7% 7.3% 7.9% 7.9% 5.7% 6% 7.3% 7.3% 6.8% Figure 3.2  Average ROE and ROA of Lebanese companies 5.6% 5.6% 5.7% 5.1% 5% 3.8% 3.7% in sample, by number of women on boards 0.29 Average ROE Average ROA 0.26 2014 2015 2016 2014 2015 2016 2014 2015 2016 RoE RoA RoS Return on Equity Return on Assets Return on Sales 2014-2016 Average 0.16 0.1 0.1 0.05 0.06 0.03 PROFITABILITY PERFORMANCE FOR LEBANESE COMPANIES 0.01 0.06 The quantitative analysis shows that Lebanese companies with women on their boards outperform those with all-male boards. Companies with gender-diverse boards perform better, with double the return on equity and 2 percent higher return on assets. On average, across the three years of the study period, companies with gender-diverse boards exhib- ited double the return on equity, scoring 20.7 percent compared to 10.3 percent for all-male boards CAPITAL STRUCTURE AND SOLVENCY (figure 3.1). This ranged between a 2 percent higher differential in 2016, 8.7 percent higher differ- ential in 2015, and 5.9 percent higher differential in 2014 compared to companies without women Global research on the impact of gender-diverse boards for capital structures shows that companies on their boards (figure 3.2). with female board members typically are not as leveraged, which—in theory—makes them more stable. For example, one study of listed firms in Kenya found that companies with gender-diverse Additionally, companies that have female board members had 2.3 percent higher return on assets boards had significantly lower proportions of debt relative to equity.41 Another study of U.S. public across the three years of the study period compared to those with all-male boards (7.9 percent for companies found that for boards with a minimum of 25 percent female directors, the influence of companies with gender-diverse boards and 5.6 percent for those without women on their boards). risk-aware female directors appeared to significantly impact financial decisions, observable in these This ranged between 2.5 percent higher differential in 2016, 2.8 percent higher differential in 2015, companies’ lower debt ratios compared to companies with no female board members.42 and 1.6 percent higher differential in 2014 compared to companies without women on their boards. However, for the return-on-sales indicator, companies in our sample with all-male boards slightly outperformed firms with gender-diverse boards, averaging 1.1 percent higher ROS across the three 41   Emmanuel Lochor Emoni, Willy Muturi, and Robert Wamalwa Wandera.n.d.“Effect of Board Diversity on Capital Structure among Listed Firms in Nairobi Stock Exchange, Kenya.” International Journal of Management and Commerce Innovations. Vol. 4, years of the study period. The data indicate that firms without women on their boards had higher no. 2 : 141–50. ROS in two out of the three years of the study: 2015—2.3 percent higher—and 2016—1.9 percent 42   Cindy K Harris. 2014. “Women Directors on Public Company Boards : Does a Critical Mass Affect Leverage ?,” Proceedings of higher. the Northeastern Association of Business, Economics, and Technology. 139–54. 36 37 3. Analysis: How Women on Boards Impact the Financial Performance of Lebanese Companies Analysis: How Women on Boards Impact the Financial Performance of Lebanese Companies 3. Similar patterns for capital structure and solvency profile were observed among Lebanese companies in this study. Figure 3.4  Capital structure and solvency overview, all sectors, 2014–2106 Companies with gender-diverse boards demonstrated greater preference for equity financing and less dependency on debt, as reflected in equity-to-asset, debt-to-equity, and debt-to-asset ratios. 2.8% Equity 14.7% Equity Generally, equity is viewed as safer than debt, because it does not require interest or repayment. As Ratio Ratio such, these firms are in an arguably better position to fulfill obligations towards shareholders and creditors, such as in case of liquidation. 2014-2016 No With 3.42 3.09 Average women 97% women 85% The average equity ratio for Lebanese companies with gender-diverse boards was 14.7 percent, com- Debt-to- Debt-to- Assets Assets pared to 2.8 percent for companies without women on their boards across the three years of the Debt-to-Equity study period (figure 3.3). This translated to a 13 percent greater differential in 2016, a 13 percent greater differential in 2015, and a 10 percent greater differential in 2014, compared to companies without women on their boards (figure 3.4). No women With women Furthermore, companies with women on their boards had better solvency, as reflected in a lower Figure 3.3  Capital structure and solvency, all sectors, by year debt-to-equity and debt-to-asset ratios. Usually, a higher debt-to-equity ratio is accompanied with greater risk, because the institution is financing its growth through borrowing. Although higher 5% Equity 15% Equity leverage might lead to more earnings than would have been possible without financing, the leverage Ratio Ratio should be compared to the cost of debt. The analysis indicates that companies with female directors on their boards have better debt-to-asset ratios during the study period: 85 percent compared to 97 percent of their peers with no women on their boards. Similarly, the debt-to-equity ratio for No 3.38 3.13 With 2014 95% Lebanese companies with gender-diverse boards was better, at 3.09 compared to 3.42 for companies women women 84% Debt-to- Debt-to- without women on their boards across the three years of the study period. Assets Assets Debt-to-Equity These findings align with the perception that women tend to take more risk-averse positions. The qualitative findings corroborate this as well, with interview and focus group participants noting that female board members tend to be more prudent and bring an increased focus on efficiency, con- 3% Equity 16% Equity tributing to financial sustainability. They added that women tend to calculate investment risk more Ratio Ratio accurately than their male colleagues, as part of a more thoughtful, thorough, and nuanced deci- sion-making approach. Female participation can positively affect overall board behavior, they said. No 3.41 2.99 With Women’s presence influences the language used and the type of conversations held during board 2015 women 97% women 84% meetings, creating a more productive dynamic, improving engagement and—ultimately— perfor- Debt-to- Debt-to- Assets mance. See the next section for more insights on the positive role female board directors can play. Assets Debt-to-Equity CROSS-SECTOR ANALYSIS 1% Equity 14% Equity Ratio Ratio Lebanon’s private sector, consisting of large financial and services industries, contributes to 75 per- cent of aggregate demand and employs 85.4 percent of the country’s labor force. The country’s relatively small public sector contributes to 25 percent of aggregate demand.43 The economy is pri- No 3.72 3.10 With 2016 99% marily based on the services, trade, financial, and manufacturing sectors, which together account women women 86% Debt-to- Debt-to- Assets Assets Debt-to-Equity No women With women   Nabil Ado. n.d. “Lebanon: Skilled Workers for a Productive Economy?” 43 38 39 3. Analysis: How Women on Boards Impact the Financial Performance of Lebanese Companies Analysis: How Women on Boards Impact the Financial Performance of Lebanese Companies 3. for approximately 60 percent of GDP (2015)44 and employ 73 percent of the labor force (2009).45 It Figure 3.5  Cross-sector profitability analysis, by year No women Lebanon's private is estimated that the financial and services sectors employ approximately 93 percent of Lebanon’s With women 20% sector contributes to female labor force (2017).46 75% 16% 15% 15% 15% 14% 14% A look across all industry sectors in the sample yields similar results, with gender-diverse boards having a positive impact on their companies’ financial performance. In particular, data from the finance and service sectors paint a positive picture of the impact that gender-diverse boards have on 7% 7% 7% of aggregate demand 6% 5% 5% 6% 6% performance. When examining the cross-sectoral data for capital structure and risk profiles, an even and employs 85.4% more distinct picture emerges. Overall, companies with gender-diverse boards showed a preference 2% for lower risk, with less debt and more equity than companies with all-male boards. -8% -3% 2014 2015 2016 2014 2015 2016 2014 2015 2016 Manufacturing of the country's Return on Return on Assets Return on Sales Financial sector Equity labor force. Lebanon’s financial sector, predominately made up of banks, contributes 10.96 percent of the 30% 28% 27% 28% country’s GDP (2015). While the banking sector has faced considerable challenges from regional instability, it has continued to grow in recent years, employing well over 24,500 employees as of 23% 2015.47 Female participation is relatively high in the banking industry. In 2014 female employees at Lebanese banks accounted for 46.5 percent of the workforce, increasing to 47 percent in 2015. 16% 9% 9% While exact figures have not been published by the Association of Banks in Lebanon, as of 2005, 8% 8% 7.4% 6% female representation in financial institution management was estimated at 19 percent.48 2% 1% 1% 1% 1% Within the sample analyzed in this research study, the Lebanese financial institutions with women on 0% Lebanon’s their boards averaged 23 percentage points higher in return on equity than comparable institutions 2014 2015 2016 2014 2015 2016 2014 2015 2016 Finance financial sector with all-male boards. Notably, at 9 percent, the average return on equity for financial institutions with gender-diverse boards fell in positive territory, compared to a negative ratio for institutions Return on Equity Return on Assets Return on Sales (predominantly banks) contributes to without any women on their boards. Financial institutions with women on their boards also out- 32% 32% 40% 10.96% 31% performed those with all-male boards in return on assets and in return on sales—the latter by an 27% average of 5 percentage points across the three years of the study period. 24% of GDP These findings indicate that board gender diversity has a strong impact on the performance of Leb- 15 % anese financial institutions. This could be due to the fact that the sector employs a comparatively 7% 7% 9% 12% 6% large number of women in Lebanon, indicating a greater degree of diversity throughout the sector 7% 4% 4% 4% 4% workforce, leading to increased opportunity for women to advance into the boardroom. In turn, this 3% In 2015, female could contribute to heightened attention to governance structures, leading to performance improve- employees at Lebanese ments positions, with research suggesting that female board members tend to be more focused on banks accounted for governance structures.49 Meanwhile, because the Lebanese banking industry as a whole has adopted 2014 2015 2016 2014 2015 2016 2014 2015 2016 Services 47% stronger governance structures, this can create an environment that is more open to women’s partic- ipation in business leadership. 23% Return on Equity 21% 23% 25% 21% Return on Assets Return on Sales of the workforce. 20% 10% 10% 11% 44   CAS. 2015.“Lebanon National Accounts Tables 2004-2015.” 45   Association of Banks Lebanon. 2015.“Human Resources in Banks Operating in Lebanon.” 7% 46   International Labour Organization. 2017. “Employment in Services (including financial services) (% of Total Employment) 6% 5% 5% 5% 5% 5% 5% (Modeled ILO Estimate),” ILOSTAT Database. https://data.worldbank.org/indicator/SL.SRV.EMPL.ZS?locations=LB&page=4. 4% 47   International Labour Organization. 2017. “Employment in Services (% of Total Employment) (Modeled ILO Estimate),” ILOSTAT Database, 2017, https://data.worldbank.org/indicator/SL.SRV.EMPL.ZS?locations=LB&page=4. 48   Association of Banks Lebanon. 2015.“Human Resources in Banks Operating in Lebanon.” http://www.abl.org.lb/Library/Files/ Files/PART 3 rep 2015 .pdf. 2014 2015 2016 2014 2015 2016 2014 2015 2016 Trade 49   See: Isidro and Sobral. 2015. “The Effect of Women on Corporate Boards on Firm Value, Financial Performance, and Ethical and Return on Equity Return on Assets Return on Sales Social Compliance.” Journal of Business Ethics. Vol. 132, no. 1:1–19. 40 41 3. Analysis: How Women on Boards Impact the Financial Performance of Lebanese Companies Analysis: How Women on Boards Impact the Financial Performance of Lebanese Companies 3. Financial institutions with women on their boards outperform like firms with all-male boards on all As with the financial sector, the Lebanese services sector tends to employ a larger number of women measures of capital structure and solvency for each of the three years in the study period. Companies than other sectors, creating deeper pipelines of female talent and a larger pool of experienced and without women on their boards have a negative equity ratio, reflecting negative shareholders equity. qualified female candidates. This could be a factor in the strong showing of services companies with This can be due to how losses are accounted for or that liabilities are greater than the company’s assets. gender-diverse boards. Services companies with women on their boards outperform like firms with all-male boards on all Services sector measures for each of the three years in the study period. Companies without women on their boards Lebanon’s large services sector is dominated by the hospitality and restaurant industries, clustered have a negative equity ratio, reflecting negative shareholders equity. This can be due to how losses primarily in the north. The sector employs almost 70 percent of the nation’s labor force and con- are accounted for or that liabilities are greater than the company’s assets tributes approximately 17 percent of GDP (2015). 50 In recent years, a shortage of skilled workers, on-going security concerns, and regional stability have combined to pose some challenges to this key sector for the country. Manufacturing and trade sectors Lebanon’s manufacturing sector represents approximately 12 percent of national output (2015) and Within the sample analyzed in this research study, the Lebanese services sector companies with gen- plays an important role in Lebanon’s economic development as a major source of employment. It der-diverse boards consistently performed better in all profitability measures in all years, compared is estimated that the industry employs approximately 22 percent of Lebanon’s working labor force to companies with all-male boards. (2016).51 As of 2017, women in manufacturing represented only 8.2 percent of the nation’s total workforce.52 • Return on equity: 14 percentage points higher on average for companies with gender-diverse boards Although severely affected by regional instability and the closure of the Lebanese-Syrian border, • Return on assets: 3 percentage points higher on average for companies with gender-diverse boards Lebanon’s trade sector traditionally has been a significant source of income and employment. In 2015, trade accounted for approximately 20 percent of Lebanon’s GDP. The trade industry is one of • Return on sales: 19 points higher on average for companies with gender-diverse boards the largest employers in the country, following the services and financial sectors.53 Within the sample of Lebanese manufacturing sector in this research study, board gender diversity also translates to positive financial performance. Figure 3.6  Overview, cross-sector profitability analysis, 2014–2016 No women • Return on equity: 7 percentage points higher on average for manufacturing companies with gen- With women der-diverse boards 21% Manufacturing 16% 14% 28% • Return on assets: 9 percentage points higher on average for manufacturing companies with gen- 23% der-diverse boards Finance 7% 5% 5% 9% 1% The presence of women on boards did not seem to have an impact on return on sales for manufac- 0% turing firms, as companies with gender-diverse boards performed similarly to like companies with RoE RoA RoS RoE RoA RoS all-male boards. A similar result was observed for trade companies in the sample, as the analysis 2014-2016 Average -14% 2014-2016 Average revealed the same return on sales ratios for all firms, regardless of board composition. However, on return on equity and return on assets, trade companies with all-male boards outperformed those with gender-diverse boards. 32% 32% 24% 24% 18% 18% Services 51   International Labour Organization. 2017. “Employment in Industry (% of Total Employment) (Modeled ILO Estimate).” Trade ILOSTAT Database. 7% 5% 7% 5% 4% 4% 52   In World Bank statistics, manufacturing is defined as “industry”; World Bank. “Employment in Industry, Female (% of Female Employment) (Modeled ILO Estimate).” https://data.worldbank.org/indicator/SL.IND.EMPL.FE.ZS?locations=LB. 53   International Labour Organization. 2016. “Matching Skills and Jobs in Lebanon: Main Features of the Labour Market – RoE RoA RoS RoE RoA RoS Challenges, Opportunities and Recommendations.” 2014-2016 Average 2014-2016 Average 50   International Labour Organization. 2017. ILOSTAT Database. 42 43 3. Analysis: How Women on Boards Impact the Financial Performance of Lebanese Companies Analysis: How Women on Boards Impact the Financial Performance of Lebanese Companies 3. Lebanese manufacturing companies display a different pattern. Firms with gender-diverse boards tend to be more financially leveraged, with lower equity ratios. On the other hand, manufacturing firms with gender-diverse boards had lower debt-to-equity ratios. One explanation for these findings could lie in the nature of the sector, which traditionally has been male-dominated. While manufac- turing plays an important role in Lebanon’s economy, contributing 12 percent of overall GDP and employing 22 percent of the country’s workforce, women represent only 8 percent of manufacturing “The quantitative analysis reveals positive correlations between the presence of women on boards and financial performance. The workers. qualitative data indicated that female board In the trade sector, the analysis of capital structures and solvency shows that the presence of women members excel at thinking strategically, solving problems, and identifying profitable deals. on boards increases the equity ratio and lowers the debt-to-assets ratio, indicating less dependency on debt and better ability to fulfill obligations towards shareholders and to lower financial leverage. Figure 3.7  Cross-sector capital structure and solvency analysis, by year No women With women No women With women Equity Ratio Equity Ratio Equity Ratio Equity Ratio 2016 29% 2014 2016 18% -14% 2016 2014 2016 21% 1.4 3.28 3.24 0.16 2015 29% 2015 19% -14% 2015 2015 21% 2014 2014 2014 2014 Manufacturing 30% -13% 18% 20% 2015 2015 Services No 1.41 0.31 With No 3.43 2.94 With women women women women 70% 2016 82% 114% 2016 79% 71% 1.45 0.30 3.83 3.24 81% 114% 79% 71% 82% 113% 80% Debt-to-Assets Debt-to-Equity Debt-to-Assets Debt-to-Assets Debt-to-Equity Debt-to-Assets Equity Ratio Equity Ratio Equity Ratio Equity Ratio 9.78 7.19 2016 14% 2014 2016 21% 2016 12% 2014 2016 27% 3.29 3.92 2015 15% 2015 22% 2015 20% 2015 28% 2014 16% 2014 2014 2014 22% 19% 24% 2015 2015 Finance Trade No 8.49 7.94 With No No 3.34 3.62 No With women women women women 85% 2016 78% 81% 2016 73% 85% 78% 80% 3.24 4.02 72% 8.49 7.41 86% 79% 88% 73% Debt-to-Assets Debt-to-Equity Debt-to-Assets Debt-to-Assets Debt-to-Equity Debt-to-Assets 44 45 3. Analysis: How Women on Boards Impact the Financial Performance of Lebanese Companies Analysis: How Women on Boards Impact the Financial Performance of Lebanese Companies 3. Figure 3.8  Overview, cross-sector capital structure and solvency analysis, 2014–2016 30% Equity 18% Equity Ratio Ratio No With 1.4 0.25 women women Manufacturing 2014-2016 Average 70% 82% Debt-to- Debt-to-Equity Debt-to- Assets Assets 15% Equity 22% Equity Ratio Ratio No 8.5 7.5 With women women Finance 2014-2016 Average 85% 77% Debt-to- Debt-to-Equity Debt-to- Assets Assets -14% Equity 21% Equity Ratio Ratio No 3.5 3.1 With women women Services 2014-2016 Average 114% 79% Debt-to- Debt-to-Equity Debt-to- Assets Assets 17% Equity 26% Equity Ratio Ratio No 3.3 3.85 With women women Trade 2014-2016 Average 83% 74% Debt-to- Debt-to-Equity Debt-to- Assets Assets No women With women 46 47 4. EVIDENCE: ORGANIZATIONAL AND HUMAN CAPITAL BENEFITS OF GENDER-DIVERSE BOARDS In addition to the connection between women on boards and positive financial outcomes, there is significant global evidence that gender-diverse boards contribute to company-wide institutional enhancements, such as strengthened board roles and dynamics, greater degrees of innovation, and improved employee retention. The research suggests that these benefits are driven by tapping into previously hidden potential, accessing a broader range of perspectives, building more productive workforces, and creating reputational enhancements that open up new business opportunities.54 Although classified as non-financial indicators, the global research has shown that these factors indirectly influence the financial performance of companies. For instance, improvements in board dynamics or employee satisfaction can positively and significantly affect financial outcomes by influ- encing the decision-making process or increasing productivity.55 Findings of this research study in Lebanon align with these results, with strong indications that the presence of women on boards and in senior leadership strengthens companies’ organizational structures by: • Strengthening corporate governance • Improving board dynamics and enhancing company credibility • Increasing employee satisfaction and attracting and retaining talent • Emphasizing innovation 54   Lone Christiansen et al. 2016. “Gender Diversity in Senior Positions and Firm Performance: Evidence from Europe;" Catalyst Information Center. “Why Diversity Matters;” Credit Suisse. 2016. “The Credit Suisse Gender 3000: Women in Senior Management;first, sectors where women form a larger share of the labor force (such as the services sector” Dyott and Ladiwala. 2017. “Gender Impact: Assessing Gender Diversity at the Portfolio Level.” 55   Isidro and Sobral. 2015. “The Effects of Women on Corporate Boards on Firm Value, Financial Performance, and Ethical and Social Compliance;” Susan Sorenson. 2013. “How Employee Engagement Drives Growth.” Gallup Business Journal. This study investigates the direct and indirect effects of women on the board on firm value. We use a simultaneous equation model to estimate the effects of women on the board on firm value, financial performance, and compliance with ethical and social principles adopted by the firm. We find no evidence that a higher female representation on the board directly affects firm’s value. However, we find indirect effects. Women on the board are positively related with financial performance (measured in terms of return on assets and return on sales 48 49 4. Evidence: Organizational and Human Capital Benefits of Gender- Diverse Boards Evidence: Organizational and Human Capital Benefits of Gender- Diverse Boards 4. “ Organizational benefits of gender-diverse boards and leadership teams with gender-diverse boards are a better reflection of the marketplace, indicating a better understanding of Greater gender diversity helps create more what customers and stakeholders want and what society dialogue, a wider range of opinions, and more open Increased focus on employee development Corporate expects. Women also have a strong sense of consumer Social communication.” and talent encouragement, and higher trends, so they can offer critical strategic insights into Female founder of a Lebanese company Responsibility employee satisfaction and retention levels the direction the company should take. For these rea- and innovation sons, participants said, investors see business benefit in gender diversity at the top. Stronger Stronger board performance and Board EMPLOYEE SATISFACTION organizational credibility, Improved board behavior and dynamics and structures corporate governance practice performance Employee meaningfulness and engagement levels are considered important measures of company success. Research shows that a sense of meaningfulness can result in significantly higher levels of engagement, with one study finding that employees who find their work meaningful are 93 percent more engaged than employees who do not. In addition, meaningfulness is connected to increased job satisfaction, with research showing that employees who find their job meaningful are twice as likely Increased focus on employee development Employee to be satisfied with their jobs.56 and talent encouragement, and higher satistication and talent employee satisfaction and retention levels Many studies have identified a positive correlation between more women in senior leadership and encouragement overall employee job satisfaction. Attention to diversity translates to the fair treatment of custom- ers and of various employee demographic groups, including promotion opportunities and career advancement. Increased gender diversity also has a positive effect on employee retention rates. 57 CORPORATE GOVERNANCE In fact, a strong commitment to diversity is thought to be one of the key managerial characteristics On the issue of corporate governance and board gender diversity, the analysis of this study indicates driving employee engagement, suggesting that gender diversity in company management can posi- a two-way, mutually sustaining relationship, in which good corporate governance can lead to greater tively affect employee satisfaction.58 gender diversity while gender diversity can improve corporate governance. Study participants said that female board members tend to bring an increased focus on corporate governance. As a result, companies with women on their boards tend to adopt more sophisticated structures and implement a TALENT RETENTION higher standard of governance practices. At the same time, a strong and well-established governance structure is thought to be a key driver for companies in focusing on gender diversity, while enhancing The participants interviewed in this study noted that greater gender diversity leads to improvements in the company’s brand and making it more attractive to female and young talent. the workplace environment and company culture, which, in turn, positively affect employee satisfac- tion levels, ultimately reducing turnover and the costs associated with training new hires. They said that women in leadership positions encourage greater transparency and bring to the table thoughtful BOARD DYNAMICS AND COMPANY CREDIBILITY and diplomatic communication skills, as well as an increased focus on conflict management. Such Responses from the focus groups and interviews reveal that the presence of women on company boards can have a positive effect on the behavior of other board members. “Women care more about the topic of corporate governance, and therefore a board that has women on it tends to be more interested in corporate The findings also suggest that greater gender diversity on the board gives a company more credibility and makes it more attractive to investors. Foreign investors in particular appear to value more balanced board com- 56 Review. 57   Catherine Bailey and Adrian Madden. 2016. “What Makes Work Meaningful — Or Meaningless.” MIT Sloan Management   Catalyst Information Center. 2013. “Why Diversity Matters;” Catalyst. “The Bottom Line: Corporate Performance and Women’s Representation on Boards (2004-2008);”"http://www.mendeley.com/documents/?uuid=43b313eb-53d0-414b-b764- 9b1564ff6e8f"]},{"id":"ITEM-2","itemData":{"abstract":"The business case for women in management contends that companies that achieve diversity and manage it well attain better financial results, on average, than other companies. In this report, Catalyst used governance.” positions. Study participants observed that companies three measures to examine financial performance: return on sales (ROS Catalyst. 2010. “Why Diversity Matters Research Studies Female board member of a Lebanese company 2005-2010.” 58   McKinsey&Company. 2015. “Why Diversity Matters;” Corporate Leadership Council. 2004. “Driving Performance and Retention Through Employee Engagement.” . 50 51 4. Evidence: Organizational and Human Capital Benefits of Gender- Diverse Boards Evidence: Organizational and Human Capital Benefits of Gender- Diverse Boards 4. “Gender diversity at the top contributes to happier employees, who then show increased productivity, bring in new clients, and generate a positive feeling skills serve to build a more humane work environment, contributing to increased productivity and talent reten- tion. As one female board member noted, gender-diverse boards tend to emphasize a positive workplace environ- ment, meaning that “Productivity is better, company about the company.” performance is better, employee turnover is lower and Excerpt from focus group discussion with male managers of Lebanese companies team loyalty is higher.” TALENT ATTRACTION A key finding from the interviews and group discussions is that diverse boards influence the degree of gender diversity throughout the company. Of particular importance, study participants said that the inclusion of women on the board enhances the company’s ability to attract female and young talent. They explained that this trickle-down effect is the combined result of positive internal changes and improved public perceptions of the company. The very existence of a better-balanced board fosters the notion that the company is characterized by a positive organizational culture and more representative of society as whole— qualities that younger and female workers tend to value. It is worth noting that study participants saw reciprocal impacts, since attracting female employees also expands the female talent pool and increases the likelihood that more women will be promoted to senior executive leadership and board positions. INNOVATION Studies have shown that diverse teams—across age, nationality, race, and gender—rate higher for innovation and research and development levels than homogenous teams.59 Similar findings were observed. The participants interviewed in this research study said that gender diversity inherently results in a wider range of opinions and perspectives, which stimulates the kind of creative thinking that can lead to innovation. And, as noted earlier, women in business tend to have a greater awareness of consumer trends and customer needs, which also can trigger innovation as the company pushes to deliver a new product that fills a previously unmet need. This increased customer responsiveness can trigger new market directions and earn the company greater customer loyalty and brand awareness, in turn driving revenue growth, yielding positive bottom line results and influencing financial performance in positive ways. “Millennials find diverse companies more attractive. So, diversity is a key competitive advantage in the ability to attract and retain top young talent.”   Julia Dawson, Richard Kersley, and Stefano Natella. 2014. “The Credit 59 Suisse Gender 3000: Women in Senior Management.”updated report the Credit Suisse Research Institute (CSRI Credit Suisse. Female member of a Lebanese company board 52 53 5. INSIGHT: BARRIERS TO ENTRY FOR WOMEN ON LEBANON’S BOARDS Around the world, women face multiple barriers as they push to shatter glass ceilings. Even when they have achieved top positions on paper, they may face challenges in performing at optimal levels. For real and sustainable progress to occur, these barriers must be understood and taken down. Globally, numerous barriers have surfaced, conscious and unconscious biases in the workplace that Common factors preventing Lebanese women from ascending prevent qualified women from winning promotions they deserve and affect their ability to climb to to company boards and senior leadership positions the top of the career ladder. Among these challenges: limited visibility for qualified female board candidates, a lack of female role models, and constraints on women’s ambitions due to a shortage of child care options or lack of family support. This study identified several obstacles that specifically prevent more women from joining the boards of Lebanese companies, including social, cultural, and professional expectations that are different Barriers facing female for women than they are for men and the lack of an enabling regulatory environment or strong board members corporate governance structures. Gendered social Corporate GENDERED SOCIAL EXPECTATIONS and corporate governance expectations regulation Among those interviewed individually or in focus groups, male and female participants alike acknowledged the presence of social, cultural, and workplace expectations that affect perceptions of Challenges to women's working women’s abilities and ambitions. These expectations often result in negative notions about performance on women’s fragility, capacity to work long hours or willingness to travel—and in skepticism about boards women’s productivity or dedication to the job. Non- Less Less authority Participants noted that such gendered beliefs about societal roles pose great challenges to women’s participatory experience and executive equal inclusion in business and society, leading to conscious and unconscious gender biases that roles power inhibit women’s opportunities—and their own ambitions. 54 55 5. Insight: Barriers to Entry for Women on Lebanon’s Boards Insight: Barriers to Entry for Women on Lebanon’s Boards 5. “We need to change the mentality that women have to stop working and completely devote themselves to their children. This mentality causes a lot of problems The findings of the study uncover a dual-pronged prob- lem. First, perceptions about the primacy of women’s household and child-rearing responsibilities are wide- spread within Lebanese society. The expectation is that women should—and do—put their family first, meaning “Conscious bias is when project tasks are divided among the men in the unit because they assume that the women will become pregnant. Unconscious bias is when men informally share for mothers.” Female member of a Lebanese company board that they will have a hard time fulfilling the duties of important and confidential information that give a demanding position such as a board directorship or them an edge over female colleagues.” senior executive. Second, within individual families, men’s careers take precedence. So, a woman might not accept a challenge assignment or big pro- “Recruiters will hire a woman for the HR department motion because her husband’s job is so demanding. Such societal pressures are preventing more but not for the finance department. I even tell female Lebanese women from aiming higher, study participants said. students in the university classes I teach that they should pursue HR studies because they have a better chance of making it to the top.” What female board Lack of encouragement, empowerment, or role models members say about bias in Exacerbating these problems: Young Lebanese women receive little encouragement to embark on the Lebanese workplace: technically challenging courses of study or careers in typically male-dominated industries, such as oil and gas. Women are urged to build on their perceived strengths in the so-called soft skills, in areas such as communications and administration and to pursue socially-oriented, non-technical career paths, perhaps with non-governmental organizations and the like. Study participants attrib- uted this dichotomy to several factors: the perception that women are soft and nurturing, limited The study findings suggest that Lebanese women often face negative perceptions about their capacity understanding about the range of available career opportunities among women themselves, and the to dedicate sufficient time to their careers and to perform effectively in their roles. For example, limited number of Lebanese women who can successfully model leadership roles. hiring decisions may be informed by cultural expectations about responsibilities outside the work- place, including household duties and childcare. In particular, those interviewed during the study said that the lack of women in politics and other areas of public life represents a significant handicap. It reinforces inaccurate societal messaging that In fact, those interviewed said that Lebanese employers often avoid hiring female staff due to con- women do not have a place in the halls of government or in positions of power. Without prominent cerns about prolonged absence for maternity leave or childcare conflicts. Senior-level promotions role models—female politicians, government officials, or other public leaders—many women cannot tend to go to men, or single and divorced women—not to married women with children. imagine that they themselves might take on such demanding roles. So, they do not even aspire to such achievement. Other gendered stereotypes are evident within the Lebanese corporate hierarchy as well, study par- ticipants said. Typically, Lebanese businesswomen hold administrative positions in areas such as human resources, while men tend to dominate the ranks in front-line operational roles, even though STEREOTYPED WORKPLACE ROLES the soft skills at which women are perceived to excel are vitally important to success in both. Such societal perceptions can feed into conscious and unconscious gender biases, posing significant Those interviewed suggested that these imbalances within company organization charts could be obstacles for women on the rise through the career ranks and potentially limiting women’s oppor- related to these stereotypes, such as the notion that women struggle with decision making and lack “ tunities and ambitions. A recent report on gender parity the strength to lead. Others put forth another explanation: Lebanese women might purposely seek from the World Economic Forum cites examples from careers in women-friendly fields—rather than in male-dominated sectors—because there are more math- and science-oriented fields, showing that even If you have to appoint board members and you have opportunities for advancement. when women have equivalent technical skills and expe- newly married women, how many would you choose? rience, they are not viewed as equals. “There is evidence Each one will get pregnant and miss work for many that, when women do have the relevant mathematical LACK OF STANDARDIZED GOVERNANCE PRACTICES AND LEGAL days. They are in decision-making positions. They and technology skills, unconscious biases can influence DISCONNECTS can’t miss work for 70 days. How is that possible? If their peers’ recognition of their capabilities,” the report one of my employees misses work for even one day I notes.60 The study uncovered an important insight about persistent gender inequality on Lebanese board: go crazy. What would that be like for 70 days?” Inadequate regulation and lack of standardized governance practices are a big part of the problem. Excerpt from focus group discussion with Lebanese law stipulates that the board of an S.A.L (joint stock) company must include directors male managers of Lebanese companies   World Economic Forum. 2017. “Global Gender Gap Report 2017.” 60 56 57 5. Insight: Barriers to Entry for Women on Lebanon’s Boards Insight: Barriers to Entry for Women on Lebanon’s Boards 5. “The reason women are not on boards in Lebanon is very simple. They do not own any stock. When women own stock, they can be part of the board.” elected by shareholders, who must own a minimum number of nominal shares.61 On paper, this means that S.A.L. company boards do not have independent mem- bers. In reality, it may require as little as ownership of a single share. A common workaround is to transfer a and outperform the men to show their worth and gain credibility among their peers. The result is that the mere presence of a woman on a Lebanese board does not automatically translate to improved company performance, those interviewed said. These observations are consistent with other research, which found that minority group members Excerpt from focus group discussion with male managers of Lebanese companies share to a nominee director with an agreement that the are more likely to be perceived negatively and subject to stereotyping, impairing their abilities to appointee will return the share upon leaving the board. influence group decisions. Thus, when women represent a small minority in the boardroom, it is less The practices vary from company to company, depend- likely that they will have a positive impact on board’s processes and quality of decisions.63 ing on the individual firm’s by-laws and shareholders’ willingness to make such arrangements. For women, this situation represents a major hurdle that can be difficult to overcome, study par- Lack of relevant skills and experience ticipants noted. Because Lebanese women are relatively late entrants into the corporate world, they To qualify for board directorships, candidates must have well-rounded experience and extensive remain underrepresented in the senior executive ranks, so many lack capital assets, such as owner- credentials. Study participants reported that many Lebanese businesswomen simply do not have ship of company stock. As a result, by law they cannot be elected to a corporate board, unless they the necessary skills or track record to be selected for open board seats. This could be due in part to have sufficient connections to orchestrate the share-transfer workaround—unlikely given the lack their comparatively late entry into the formal labor force and continued underrepresentation in the of business networks that include women—or they inherit stock. So, women remain excluded from management ranks, especially in certain industry sectors, such as manufacturing. Lebanese boardrooms—regardless of talent, experience, or qualifications. Female board members of family-owned companies, in particular, might not have the requisite skill- sets due to the nature of their appointment. So, they are typically relegated to non-participatory CHALLENGES TO WOMEN’S PERFORMANCE ON BOARDS roles, rather than assuming decision-making responsibilities. This creates a self-perpetuating cycle in which women are prevented from growing in their positions and developing new skills and expertise. Even when Lebanese women have a seat at the board table, they may not have the opportunity per- They will continue to lack the qualifications for appointment to boards of companies not owned by form well. Study participants identified a number of challenges faced by female board members and their family. senior managers that may impede their effectiveness. Still, those interviewed reported that they are seeing generational improvements. As more Lebanese women earn university degrees and access better employment opportunities they are acquiring the Limited impact on decision-making necessary skills and expertise to compete for board directorships. Yet these generational changes, Although Lebanese women are stepping into senior decision-making positions at an increasing alone, will not ensure the kind of widespread progress needed to address societal inequalities, study rate, the study findings suggest that in general, these appointments are based on inheritance rather participants said. A range of efforts and initiatives will be needed to bring about lasting change. What male mangers than competence. say about women on Lebanese boards: Family businesses are particularly important in Lebanon, as with the Middle East region as a whole. “There is a difference between diversity and Such firms contribute an estimated 60 percent of regional GDP and employ over 80 percent of the inclusiveness. Diversity means that a woman Middle Eastern workforce. In Lebanon, nearly 60 percent commercial firms are family owned. Due is present. Inclusiveness means that her voice in large part to religious laws governing inheritance, many of these companies appoint female mem- is heard and her opinion is considered. Some Lebanese boards might be diverse, but they bers of the ownership family to the board. 62 As a result, despite the title, these women tend to have definitely are not inclusive.” no voice or say in board deliberations or decisions. In addition, study participants said that female board members are not given a chance to demonstrate their capabilities. They are marginalized, “Only 20 percent of female board members exert less authority, and have little executive power compared to male colleagues, due to insidious in Lebanon are appointed because of their bias and misconceptions about what they can do. competence. The remaining 80 percent are only in those positions because of their inheritance.” The situation is exacerbated when women’s numbers are few, study participants said. Plus, female What female managers board members are not automatically respected by their male colleagues. They must work harder say about women on Lebanese boards:   Jasmin Joecks, Kerstin Pull, and Karin Vetter. 2013. “Gender Diversity in the Boardroom and Firm Performance: What Exactly 63 Constitutes a ‘Critical Mass?’” Journal of Business Ethics . Vol. 118, no. 1: 61–726; Harris. “Women Directors on Public Company   Chamber of Commerce, Industry and Agriculture of Beirut and Mount Lebanon. 2001.“Commercial Companies in Lebanon.” 61 Boards: Does a Critical Mass Affect Leverage ?”; Eden B. King et al. 2009. “Understanding Tokenism: Antecedents and Consequences   Earnst & Young. 2014. “Family Business in The Middle East | Facts and Figures,” Family Business Yearbook; PwC.. 2016. 62 of a Psychological Climate of Gender Inequity,” Journal of Management 36, no. 2 : 482–510. “Keeping It in the Family: Family Firms in the Middle East.” 58 59 6. ACTION: RECOMMENDATIONS TO INCREASE THE NUMBER OF WOMEN ON LEBANON’S BOARDS A generational shift is taking place in Lebanon. Increasingly, families are encouraging their daugh- ters to access the same educational opportunities as their sons and more young women are opting for corporate careers. Eventually, as this critical mass of women work their way up the corporate ladder, many will reach positions of senior leadership—in far greater numbers than today. Still, as noted in the previous section, these generational shifts, taken alone, are unlikely to close the gender gaps or bring about the changes in Lebanese corporate culture needed to improve gender balance in the boardroom. In this section, concrete recommendations are provided to improve gender diversity on Lebanon’s boards and grow the pipeline of qualified women with leadership potential as a way to help close these broader gaps more quickly, while at the same time enabling improved company performance and enhancing the nation’s overall economic growth. 60 61 6. Action: Recommendations to Increase the Number of Women on Lebanon’s Boards Action: Recommendations to Increase the Number of Women on Lebanon’s Boards 6. Overview of recommendations to improve gender diversity in Lebanon’s boardrooms 1 Recommendation #1: Develop and enforce higher standards of corporate governance Tips from IFC’s Corporate Governance best practices toolbox Under Lebanon’s current regulations, board members are required to be shareholders of the com- • Encourage the adoption and enforcement of pany, excluding the possibility of having independent directors. And, as noted, actual practices vary market-wide governance by company. For women, a demographic with limited power and connections in the corporate world, regulations: Regulations this represents a major roadblock. Women often lack the necessary capital to meet shareholder should apply equally Strengthen educational requirements. Inconsistently enforced standards and practices foster a murky and subjective envi- across all sectors. Support high-potential female efforts to prevent employees, facilitate female ronment that puts women at a particular disadvantage. • Tailor corporate gendered biases and leadership and actively Re ect governance initiatives empire women convey benefits of gender sh ors s By contrast, putting into place robust and standardized corporate governance practices that are to the company, keeping rm & t diversity ap fr en we ess enforced consistently can instill a greater degree of fairness in board appoint processes, so everyone— in mind size, ownership ing om po en structure and capacity to men and women alike—play by the same rules. Such action will help bring down this significant em war co ins accommodate changes: m barrier to women’s advancement. ale al a pa ide Increase public visibility of Promote conducive Corporate governance nie ou female leadership and company mentality and fem ciet Improve is not a one-size-fits-all sa t create awareness about gender diversity structures that facilitate concept! So an inclusive and gender nd gender equality 2 in the boardroom Recommendation #2: Encourage public disclosure diverse organization. • Consider a phased on company gender diversity in companies approach to corporate Corporate governance governance upgrades: & transparency According to both male and female study participants, company disclosure of diversity-related infor- Good governance is a mation would help raise awareness about workforce composition. However, most said that quotas journey. As initiatives Develop and enforce Implement and promote are adopted and as the higher standards of  voluntary public would be an ineffective tool to achieve better gender balance in the boardroom. company grows, the corporate governance disclosure of gender governance structure diversity in companies In particular, male study participants said that quotas would unfairly disadvantage experienced men must evolve as well. in competing for board positions. Others said that companies probably would find creative ways to • Promote and create get around the quota, such as by appointing female family members or friends. Those interviewed incentives to publicly also indicated a lack of confidence in the government’s willingness to enforce any such quotas. disclose corporate gender diversity CORPORATE GOVERNANCE IMPROVEMENTS On the other hand, study participants said that measures to increase transparency and heighten • Publish information on awareness of gender issues could prove quite effective in improving the gender balance in Lebanese compliant and non- The implementation of corporate governance practices in Lebanon has been slow. There is no central boardrooms. They noted that such measures also could lead to more open recruitment processes. compliant companies agency that regulates, oversees, or enforces corporate governance standards across industries. Transparency could be achieved through public disclosure of company information such as compo- to incentivize greater gender diversity across sition of boards, senior management and general staff, as well as gender diversity targets, strategies companies The research reinforces other findings and best practices suggesting that initiatives to improve corpo- and initiatives. As part of this focus on transparency, companies also might consider reporting rate governance—particularly those with a focus on enhanced board quality and functionality—can on board member requirements, qualifications of current board members, and approach to board lead to increased board diversity, since corporate governance practitioners and researchers alike member selection. identify gender-diverse boards as a driver of higher environmental, social, and governance stand- ards.64 Good corporate governance practices are key to leveling the playing field for male and female Disclosure on gender-related issues has proven an effective way to improve gender balance in com- board members, helping to mitigate the impact of conscious and unconscious biases against women. panies in other markets. For example, in Canada, the Canadian Securities Administrators requires firms listed on the Toronto Stock Exchange to report annually on gender-related issues as part of its comply-or-explain rules. Companies must share information about their policies on women’s representation on the board, gender considerations in board director and senior executive identi- fication and selection processes, and gender targets for the board and senior management, among 64   See: Akin Gump. “Top 10 Topics for Directors in 2018: Board Composition.” AG Deal Diary, January 2018; and Cristina Banahan and Gabriel Hasson. “Across the Board Improvements: Gender Diversity and ESG Performance.” Harvard Law School others. Since the regulation took effect in 2014, the gender gaps in the boardrooms of Canada’s Forum on Corporate Governance and Financial Regulation, September 6, 2018. listed companies have narrowed: in 2015, women held 11 percent of board positions and by 2016, 62 63 6. Action: Recommendations to Increase the Number of Women on Lebanon’s Boards Action: Recommendations to Increase the Number of Women on Lebanon’s Boards 6. 4 Recommendation #4: Raise public awareness this had increased to 14 percent. Meanwhile, the percentage of companies with policies to promote women into board positions increased from 15 percent in 2015 to 35 percent, while the percentage about women’s strengths and capabilities of companies with board gender targets increased from 7 percent to 11 percent.65 “ Popular culture and media can play an important role in changing hearts and minds about what girls and CHANGE SOCIETAL PERCEPTIONS ABOUT WOMEN women can do. Study participants identified a number Television programs need to show that men and of channels to foster awareness and inform public and women can share household responsibilities and It is one thing to make a sweeping statement about the importance of changing the ways in which corporate perceptions, including: child care duties. This will set a great example for society perceives women’s roles. Far more complicated is translating this lofty goal into concrete Lebanese men, who will see that the wife isn’t just actions that will bring about a shift in societal attitudes. While the full range of efforts needed is • Popular programming: featuring female charac- about cooking, cleaning, and changing diapers, while well beyond the scope of this report, study participants identified several tangible steps that will help ters playing roles as successful business executives, the husband sits around doing nothing”. break down commonly held stereotypes and catalyze progress toward equality in Lebanon. politicians and powerful leaders in other aspects of Female board member of a Lebanese company public life and male characters who share house- hold duties equally. Such reversal of traditional 3 Recommendation #3: Educate children roles in television shows and on social media can increase cultural acceptance of gender equality equally to reduce gender bias and break down gendered stereotypes. Changing cultural mindsets will be key to ensuring that women remain in the workplace even as they raise their families, so they can build the skills and Society and its institutions—including schools—play a significant role in reinforcing gender norms expertise needed to climb the career ladder and eventually earn a place at the boardroom table. and misperceptions. To break the cycle, promoting gender equality from a very early age is essential. • Public service advertising campaigns, making use of television, radio, news publications, and The study revealed near unanimous agreement that education is a fundamental building block for social media gender equality and diversity. Better and more inclusive education empowers girls who will become women and opens the eyes of boys who will become men. • Academic seminars at universities and teacher training: to give educators the tools they need to promote the values of fairness and equality In fact, formal education—for boys and girls alike—can be a powerful agent of change, study partic- ipants said. Girls gain confidence in themselves and in their abilities. They find their voice and speak • National and regional conferences: to make the business case for greater diversity their mind. And boys learn to respect girls as equals. Non-governmental organizations, international institutions, and non-profits can support these Eventually, young boys and girls grow up. Those who become accustomed to working together as efforts in their outreach and advocacy campaigns, playing an important role in normalizing gender children will expect—and accept as the status quo—that their workplace approach will be similarly equality. gender-blind and that their company teams will include a mix of men and women on equal profes- sional footing. Ultimately, such progress will help break down gendered stereotypes, molding a Study participants emphasized that all such efforts should be driven by men and women alike, to new generation of male and female peers, colleagues, and leaders who work alongside each other create more impact. as equals. They said that while some public awareness initiatives are underway in Lebanon, they are disjointed, “ and without a clear vision or objectives. What is required, they said, is a strong and coordinated push to encourage societal embrace of equality. It all starts with the schools. We might not be able 65   Canadian Securities Administrators. 2014.“Amendments Instrument for National Instrument 58-101 Disclosure of Corporate Governance to change what happens inside the home, but we Practices;” Canadian Securities Administrators. 2017. “CSA Multilateral can bring about change through education. In turn, this will influence lawmakers to pass legislation Staff Notice 58-309 Staff Review of Women on Boards and in Executive Officer Positions – Compliance with NI 58-101 Disclosure of Corporate Governance Practices.” 5 Recommendation #5: Empower female leaders through training and networking that respects all human beings –male and female— Initiatives such as women-only board training give women with leadership potential—and women equally." already in leadership positions—a safe space to share their experiences and develop their skills. Excerpt from focus group discussion with male members of Lebanese boards Access to such opportunities also builds bonds with others that can help advance careers in the same way that men’s networks traditionally have done. In fact, study participants emphasized a critical 64 65 6. Action: Recommendations to Increase the Number of Women on Lebanon’s Boards Action: Recommendations to Increase the Number of Women on Lebanon’s Boards 6. “ commitments to diversity come with tangible action and concrete initiatives—and not just words. A need for stronger business networks for women, as well Tips from IFC’s women company-wide focus on improving gender balance and increasing opportunities for women will help Having a strategy to improve gender equality in as for more inclusive, mixed-gender networks. Such in business leadership attract and shape new talent for organizations and encourage companies across the range of sectors strategy Lebanese society is important, of course. And it’s social systems can facilitate valuable connections and to appoint more women to senior management and board positions, according to those interviewed. great that there are organizations advocating for knowledge sharing. They broaden the reach and increase • Encourage equal the visibility of potential board candidates while adding opportunities for all women’s rights. But until there is a coordinated and As noted above, male leaders have a particularly important role to play within their own companies to their industry knowledge and insight—all of which school- aged children, united effort, their work will not be effective.” in pushing for, publicly committing to, and ensuring uptake of family-friendly policies and efforts to regardless of gender increases the chances for future board appointments. Excerpt from focus group discussion with recruit, retain, and promote qualified women. Study participants—male and female alike—agreed and share best diversity male members of Lebanese boards practices with students, that a persistent and tangible commitment to diversity throughout the workplace starts at the top. parents, and teachers Leaders should tell success stories of female leadership and actively convey the benefits of gender diversity as they make public speeches or address their staff, they said. Such efforts will help attract • Educate teachers on 6 Recommendation #6: Increase visibility of women in leadership and retain female talent, deepening pipeline, and ultimately increasing the number of women in senior leadership and board roles. creating supportive and non-discriminatory learning environments Study participants noted that a lack of visibility for female leaders contributes to the misperception and empowering girls and boys alike in preparation that Lebanon does not have any women in business leadership positions and that women are not cut 8 Recommendation #8: Create mentorship and for future leadership roles out for leadership. Shining the spotlight on successful female leaders—and how they have helped sponsorship programs for promising businesswomen • Advocate for female their companies achieve goals—can send a powerful and affirming public message about women’s leaders in the public capabilities. Companies themselves can showcase their female leaders, which could give them a Career development initiatives such as mentoring and sponsoring can open doors for advancement, sector, in arenas such as positive public relations boost. politics and government study participants said. The guidance, wisdom, support, and encouragement received through such programs can help build managerial skill sets, enabling a forward career trajectory for high-poten- • Share information and tial female staff (as with male staff). When successful, these initiatives also serve to provide valuable communicate widely 7 Recommendation #7: Partner with about the value of female business insight and personal connections that can help elevate women to positions of power, com- men as agents of change leadership and the plementing efforts to increase the pool of potential female leaders. business case for gender Men make up half of the population and hold the majority of leadership positions in Lebanon, diversity at the top—as Mentorship programs often combine training and continuous development through conversations well as the barriers faced meaning that male commitment is essential to drive increased gender diversity and greater equal- between mentors and mentees, such as on navigating the corporate leadership environment. In the by women with career ity in society and in the boardroom. Developing and building effective partnerships to promote ambitions absence of a large pool of female senior managers, mentors might be senior men who—in addition to greater gender diversity requires the involvement of powerful men who are prepared to challenge the the individual guidance—can play a more public advocacy role by supporting the decisions of their • Create stronger women’s status quo and fight ignorance and stereotypes surrounding gender. Australia’s “Male Champions of female colleagues. This can help solidify women’s authority and earn them the respect of general business networks as Change” can serve as a model for such efforts in Lebanon. This initiative engages prominent male well as more inclusive staff. Mentors also can be influential in easing women’s return to the workplace after a career break, leaders, who commit to promoting gender diversity in their organizations and actively increasing mixed networks to for example after leaving to care for children.67 awareness of gender-related issues in the workplace.66 facilitate gender-inclusive networking and access “ Sponsorship is another powerful tool for increasing the number of women in leadership positions. to information, business This involves an influential person advocating on behalf of a talented individual and using his or her partners, and potential RESHAPE COMPANIES AND SECTORS employers Offering seminars and running awareness campaigns network to support that individual’s development. However, study participants noted an important FROM THE INSIDE OUT caveat: for sponsorship initiatives to make a difference for Lebanon’s businesswomen, current senior • Gain buy-in from male to highlight successes of female leaders will executives and board members—most of whom are male—will need to agree that such arrangements leaders to push for demonstrate to companies—and more importantly to Increasing the number of women on Lebanon’s boards greater gender balance have value, and that they will play active roles in advocating on behalf of the qualified and experi- the men in these companies—that having women in will require a massive culture change, within individ- in boardrooms and enced women they sponsor when they learn of available board positions. management and on boards is valuable.” ual companies, across industry sectors, and throughout executive suites Male manager of a Lebanese company the market as a whole. Study participants noted that these stakeholders are on the front lines of ensuring that 67   See: Abba Bhattarai. “PricewaterhouseCoopers connects moms-to-be with moms-already.” The Washington Post, May 20, 2012,   For more on Male Champions of Change, please visit the organization’s website: malechampionsofchange.com 66 accessed November 15, 2018, www.washingtonpost.com/business/capitalbusiness/pricewaterhousecoopers-connects-moms-to-be- with-moms-already/2012/05/16/gIQAXZkVdU_story.html?utm_term=.894bbb8ceafc 66 67 sdraoB s’nonabeL no nemoW fo rebmuN eht esaercnI ot snoitadnemmoceR :noitcA .6 Action: Recommendations to Increase the Number of Women on Lebanon’s Boards 6. 9 Recommendation #9: Invest in training on diversity and women’s leadership Tips from IFC’s women in business leadership strategy Study participants singled out company-wide diversity training as a key opportunity to break down • Invest in professional gendered stereotypes and promote the benefits of workplace equality. These efforts are particularly development and important in creating broad-based understanding and acceptance of female leaders, they said. leadership training for employees, especially women, so they can In addition, women-only leadership training can be beneficial, creating a safe space for self-reflection acquire the needed and honest dialogue. In such programs, women can work on developing necessary skills while also skills and experiences to engaging with one another on navigating and overcoming gender stereotypes. Male-only training advance in their careers can contribute to these efforts as well, by helping men improve self-awareness and develop the skills • Foster awareness about to handle gender-related issues. All such training should include perspectives on different leadership different leadership styles—including the ways in which women’s’ leadership styles differ from those of men. styles and women’s “ leadership capabilities to reduce gender bias 10 Recommendation #10: Build a more • Educate male employees family-friendly work environment on the value of diversity and gain buy-in from Our warehouse The study findings point to the importance of supportive work cultures and flexible working con- male colleagues to respect female leaders’ manager is a female ditions in driving female leadership. A conducive work environment makes it easier for men and women alike to balance professional and domestic responsibilities, enabling more women—for authority and credibility architect. She is • Provide opportunities whom the conflict is especially relevant—to assume decision-making roles. To support employ- to build board skills for ees who are juggling home and career, study participants said that Lebanese companies should qualified women the first woman in implement family-friendly and gender equality policies, including parental leave, flexible working • Encourage male and the Middle East to conditions, and equal pay. These policies should apply equally to male and female employees if they female executives and are to have a more extensive societal impact. board members to hold such a position However, policies alone will not make a difference if no one makes use of them. Companies should sponsor and mentor high-potential women in an oil and gas ensure that such policies do not exist in name only by encouraging staff to take advantage of them. No one—male or female—should be penalized for accessing the benefits allowed by these rules. • Share gender-diversity- in-leadership success company. Now, she stories internally throughout the is in business school company and with peers and business partners and we are paying • Implement family- and women-friendly her tuition. Once workplace policies she completes her MBA I am thinking of giving her even more responsibilities.” Male senior executive of a Lebanese oil and gas company 68 69 7. CONCLUSIONS: A REGIONAL PICTURE EMERGES Combined, the quantitative and qualitative data collected for this report reveal important findings on the positive connections between gender-diverse boards and better company performance. Study participants offered insights into the challenges women continue to face in Lebanon and the barri- ers preventing more Lebanese women from ascending into board directorships. They also provided concrete recommendations to begin to address the imbalances and build a stronger pipeline of female talent. Of note, the Jordan study, conducted in 2015, and the Egypt study, conducted in tandem with this research, show similar results. The Jordanian analysis revealed that the presence of women on boards improves corporate governance, and that companies with gender-diverse boards exhibit higher returns on assets and equity compared to those with all-male boards. In Egypt, on average, companies exhibited higher returns on equity, returns on assets, returns on sales, gross margins, and profitability growth across the 2014–2016 period. The Egypt study also found that companies with women on their boards typically invest more in their employees, leading to increased worker satisfaction, reduced turnover, and heightened productivity. They also spend more on research and development as a percentage of sales, indicating the kind of focus on innovation that sets companies apart and helps sustain growth over the long term. The findings of this study align with the results from Jordan and Egypt. We determined that Leb- anese companies with gender-diverse boards perform better, with returns on equity that are more than 10 percent higher and returns on assets that are more than 2 percent higher. In addition, our analysis revealed that the Lebanese companies in our sample with women on their boards have more prudent capital structures. While each of the markets studied has its own unique characteristics, a regional picture begins to emerge: that gender-diverse boards of MENA companies can improve corporate governance, posi- tively influencing board dynamics and making companies more attractive to investors, and that the presence of women on boards improves corporate governance and enhances the workplace environ- ment, which strengthens companies over the long term. The challenges faced by women in the three countries are similar as well. In recent years, women in all three nations have gained access to a wider range of opportunities. Yet gendered stereotypes and regulatory barriers persist. It will require concerted effort and a host of actions to bring about the changes needed so that MENA women can achieve positions of leadership in similar numbers to their male peers. There is a moral argument for equity and fairness in support of increasing the number of women on boards. Taken as a group, however, these three studies reveal a powerful business argument as well: Companies with gender-diverse boards perform better and have greater potential for long-term sustainability. For Lebanon, a nation faced with so many complex problems—including an influx of refugees that is overwhelming public services capacity, high unemployment, low productivity, and slow economic growth—and, indeed for a region similarly beset by such issues, an increased focus on encouraging women in leadership could help to strengthen the economic base, creating jobs, stimulating growth, and stabilizing markets. 70 71 KEY FACTS & FIGURES 60% $0.6 increase in GDP if gender parity is Lebanon's reached in MENA private sector of commercial firms are family owned trillion region by 2025 contributes to of aggregate and employs of the country's 50% demand labor force Companies with female board members exhibited Women constitute Female representation of sampled companies have 47% in financial institution female board members management was estimated at They represent 10.4% 1.1% 2.3% of the Lebanese banking sector, their highest contribution across all sectors 19% 14% higher higher higher 81% growth in growth in growth in Due in large part to religious laws of 61 female mid- return on return on return on governing inheritance, many senior level bankers of all board members assets sales equity companies appoint female members who participated in in of the ownership to the board. As the study have worked 47% have one or two female board members and 3% of companies have three or more + a result, despite the title, these women tend to have no voice or say in board deliberations or decisions at their financial institution for more than 10 years 72 73 APPENDIX A. ADVISORY APPENDIX B. ABOUT THE BOARD MEMBERS INTERVIEW AND FOCUS GROUP PROCESS An advisory board, comprised of senior-level executives and officials, guided the As noted in the report, the purpose of the interviews and focus groups was to supplement the research and provided feedback on findings. Members of this group are listed here. quantitative data gathered. This qualitative research added significant value, by incorporating the perspectives of men and women who have first-hand experience with the value of gender-diverse boards as well as the barriers that prevent more women from achieving senior leadership roles in Name Title/Position Organization Lebanese companies. Abdallah Jabbour Managing Director Lebanon for Entrepreneurs Abir Chebaro Advisor to the Minister for Women’s Affairs Ministry of Women’s Affairs AMONG THE QUESTIONS ASKED Asmahan Zein President Lebanese League for Women in Business OF FEMALE BOARD MEMBERS IN Badri El Meouchi Corporate Governance Consultant Excellence in Governance-Lebanon (EIG-L) Tamayyaz ONE-ON-ONE INTERVIEWS: Chadia El Meouchi Managing Partner Badri and Salim El Meouchi Law Firm Charlotte Karam Associate Professor Olayan School of Business, American University of Beirut • Tell us about your career path? How did you reach the • What are the benefits of having women on boards? point where you are today? Cherine Debbas Managing Partner AGW Advisory • Can you provide examples of the benefits experienced Elie Aoun Chairman Excellence in Governance-Lebanon (EIG-L) Tamayyaz • What are the reasons you became a board member? by your company as a result of having a gender-diverse Fida Afiouni Associate Professor Olayan School of Business, American University of Beirut What are the reasons you were elected? board? Ghina Achkar Corporate Communications Officer and BLC Bank • How would you generally describe your experience as a • How does the presence of female directors change the copywriter, WE Initiative woman on a company board? board’s dynamics? Joelle A. F. Rizkallah Co-founder Women in Front Joelle Bou Abboud Group In-House Legal Counsel Holdal S.A.L. • Have you experienced any obstacles in achieving your • In your opinion, does gender diversity lead to better cor- board position? If so, what were the obstacles and what porate governance practices, or does good corporate Joyce Jammal Board member Association of Lebanese Industrialists did you do to overcome them? governance lead to improved gender diversity? Why? Mona Itani Founder and CEO Riyada for Social Innovation Rania Mardini Lecturer Olayan School of Business, American University of Beirut • How can the obstacles be limited or removed? Who can • Looking ahead, what is the outlook for increasing the accomplish this? number of women on corporate boards? Rasha El-Hassan Director of the Corporate Governance Olayan School of Business, American University of Beirut Initiative • Have you experienced any challenges while serving as • What is the role of various stakeholders in promoting Rita Rizk Managing Director Excellence in Governance-Lebanon (EIG-L) Tamayyaz a board member? If so, what have been the challenges the cause of board gender diversity: policy makers, Sabine Hatem Economist Institute des Finances and what have you done to overcome them? companies themselves, non-governmental organiza- tions, business membership organizations? Sahar Ghaddar Regular member Association of Lebanese Industrialist • How can the challenges be limited or removed? Who can Salma Sabra Director General Banque Libano-Francaise accomplish this? • What do you think are the best measures for improving Tania Moussallem Head, Marketing and Support Groups BLC Bank gender diversity on corporate boards and why: • What are some of the key factors in lowering barriers for Zeina Mhaidly Program Manager Lebanese League for Women in Business women to advance to board seats? ▷▷ Quotas ▷▷ Transparency in recruitment process • How would you describe the general attitude and ▷▷ Mentoring and development behavior towards you from fellow board members and ▷▷ Networking programs executive management? ▷▷ Other 74 75 Appendix B. About the Interview and Focus Group Process AMONG THE QUESTIONS ASKED OF COMPANY REPRESENTATIVES AND IN FOCUS GROUP DISCUSSIONS: • How would you characterize the situation for women • Are women in senior management appointed as execu- on boards of Lebanese companies? Has it changed in tive directors? Why/why not? recent years? Does this vary across different industries or types of companies (e.g. family companies, banks)? • How does gender diversity on the board affect: • Do you consider it a challenge for women in executive ▷▷ Financial performance? and top management positions to become board direc- ▷▷ Capital structure? tors and why? ▷▷ Risk tolerance? ▷▷ Innovation levels? • What are some examples of the barriers that prevent ▷▷ Staff meaningfulness/satisfaction levels? more women from serving on company boards—such ▷▷ Better communication and problem-solving on the as culture, religion, family, gender, societal roles, reg- board? ulations, company environment, missing skills, lack ▷▷ Other? of confidence—and how do these barriers manifest themselves? • Does the presence of just one female board member make a difference? • What factors enable women to be nominated and appointed to boards: social, personal, policies/quotas, • What is the optimal number of women on company company environment, succession planning, interna- boards? Why? tional quotas? • Do you think introducing gender quotas for Lebanese • If women are on board committees, which committee companies would be successful? If yes, how? If not, why? memberships do they typically hold? In which commit- tees are women generally under-represented? • What other legal mechanisms (such as laws or regula- tions) or voluntary mechanisms could be introduced to • What challenges do female board members face when encourage gender diversity on company boards—such dealing with male-dominant boards and executive as transparency in recruitment, mentoring and devel- management? opment, and networking? • Is there a difference in pay for male and female board • Does the expatriate Lebanese population have a role in members? 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