The Board Gender Diversity Puzzle
Board gender diversity is widely seen as a win win outcome that benefits both firms and society. In response to quota laws, investor pressure, and shifting social expectations, many companies, particularly in Europe, have increased the number of women on their boards. Yet despite this progress, the business results remain uneven. Some firms benefit from greater gender diversity while others see no improvement at all. This lack of consistent evidence suggests that simply adding women to boards does not automatically translate into better governance or performance.
Not All Female Directors Have the Same Impact
One important reason for these mixed results is that women on boards are often treated as if they were all the same. In reality, women arrive in the boardroom through very different pathways, which strongly affects how much influence they have. Our research published in the Journal of Management Studies focuses on one particularly important distinction in family firms: female directors family affiliation.
In family firms, many women join boards because they are daughters, spouses, or relatives of the main shareholders. While this is common practice, its consequences are rarely discussed. Some argue that family female directors are symbolic appointments aimed at fulfilling gender quotas, while others point to prominent examples of successful female heirs who play central leadership roles. These contrasting views raise an important question about when and how family affiliated women directors can add value in the boardroom.
What We Found
To answer this question, we analyzed 127 Italian listed family firms over the period from 2003 to 2019, carefully identifying the family ties of all directors. Two clear patterns emerge.
First, women appointed from outside the family are consistently linked to better financial performance. On average, family affiliated female directors do not show the same effect. This does not mean that family women lack ability or commitment. Instead, it reflects the constraints they often face. In many family firms, long standing gender roles still shape expectations. Women are more likely to be seen as supporters or family representatives rather than as strategic leaders, especially when male relatives dominate the board. These dynamics can limit women’s authority and reduce their influence over key decisions.
By contrast, non family female directors typically enter boards through the external labor market. Their appointments are based on professional credentials and experience, which gives them greater independence and credibility. This positioning allows them to participate more forcefully in strategic debates and to represent the interests of a broader range of stakeholders beyond the controlling family.
Our second finding shows that board context is critical. The impact of family affiliated female directors depends heavily on how many male family members sit on the board.
When male family representation is limited, family female directors contribute positively to firm performance. In these settings, women face fewer constraints in establishing themselves as legitimate business leaders. However, when boards are dominated by male family members, the effect of family female directors becomes negative. In such contexts, traditional gender roles are more likely to be reinforced, making it harder for women to exercise authority and influence even when they formally hold equal positions.
This suggests that gender diversity fails not because women are present, but because underlying power structures remain unchanged.
Why This Matters for Practice
For family firms, the message is clear. Family firms that want real value from gender diversity need to focus on how their boards function, not just on who sits at the table. Appointing women from outside the family often strengthens performance because these directors bring independence and are more willing to challenge decisions. When female family members join the board, the overall power balance becomes critical, as boards dominated by male relatives can unintentionally limit their influence. Simply adding women does not change outcomes if underlying dynamics remain the same. Giving more space to independent voices, using neutral facilitators for sensitive discussions, and embedding inclusion into board evaluations can help ensure all directors are heard and better decisions are made.
For investors and advisors, board gender diversity should be assessed qualitatively rather than mechanically. Understanding who the female directors are, how they entered the board, and how family power is distributed provides a more accurate signal of governance quality and long term value creation.
For policymakers, the findings suggest that quota laws are effective at increasing representation, but they work best when they also support women’s real influence at the top of organizations. Encouraging a strong external market for female directors can significantly increase the performance benefits of gender diversity.
The Bottom Line
Increasing the number of women on boards is necessary, but it is not sufficient. Gender diversity creates value only when women are given the legitimacy, authority, and space to lead. For family firms in particular, this requires looking beyond headcounts and addressing the deeper governance dynamics that determine who truly holds power in the boardroom.
