Research has shown that greater representation of women in C-level positions results in positive outcomes. But I had a chat with professors who set out to explore how women in senior-level positions drive better business outcomes—and it all comes down to innovation.

“With our study, we wanted to move the research on female leaders and firm outcomes from its current descriptive nature … to explanatory,” says Corinne Post, a professor of management in Lehigh University’s College of Business, and coauthor of “Research: Adding Women to the C-Suite Changes How Companies Think,” published this month in the Harvard Business Review.

The study indicates that women joining the C-suite may result in an increase in research and development (R&D), and a decrease in mergers and acquisitions (M&A), Post, along with coauthors Boris Lokshin, an associate professor at the department of Organization, Strategy and Entrepreneurship at Maastricht University, and Christophe Boone, a professor of organization theory and behavior at the Faculty of Business and Economics, University of Antwerp, found.

“After women were appointed to senior positions and firms began to exhibit higher levels of both openness to change and aversion to risk, firms reported an average 1.1% increase in [research and development] R&D investments—and the average total R&D investment of the companies in our sample was $6,538 million, so a 1.1% increase is substantial,” according to the report. 

“What surprised me is the almost instantaneous nature of the shifts in orientations following a female appointment,” says Lokshin. “My assumption was there is much more inertia in these teams and the way they think.”

Taking a look at women’s path to executive positions “sheds some light on how one might simultaneously court change and avoid risk,” Post explains. “To prove themselves worthy of promotions to the highest corporate levels, women need to walk a difficult tightrope. In order to counter stereotypes, they learn to stand out by promoting visionary and novel strategies.”

The professors analyzed strategic innovation—M&A and R&D—of 163 multinational companies between 1998 and 2012; and kept track of the appointments of female and male executives. The companies in the study sample are from 20 different OECD countries, which includes the U.S. and Japan, for example, says Post; and all have a major market share presence in Europe. 

The results also showed that female executives have “more of an influence on the C-suite’s way of thinking when they can more readily assimilate into the top management team,” says Post. 

“What this means for C-level hiring practices is that simply hiring a female executive is not enough to reap the benefits of such an appointment,” she says. “It’s crucial to include and rapidly integrate this person into the executive team.”

I asked Post how the study’s findings can be applied to the role of a CFO.

A lower tolerance for risk, combined with greater focus on ESG, for example, “may prompt a consideration of how strategic decisions affect a wider range of stakeholders,” says Post. “This, coupled with more openness to change, may widen the range of value creation strategies a firm considers,” she says. 

See you tomorrow.

Sheryl Estrada
sheryl.estrada@fortune.com

Big deal

“Approximately one in 10 investors find the ESG information they are looking for in corporate disclosures,” Stephen Adams, director in the Gartner Finance practice said in an April 27 report. “There is an enormous opportunity here for most companies to stand out better to investors simply by providing the information they are looking for.” Gartner created a Financial Brand Framework for CFOs to assess their company’s ESG investment proposition and identify opportunities for improvement in seven areas: Company strategy; products and services; financial track record; performance outlook; execution credibility; risk resilience; and shareholder culture.

Going deeper

The 2020 Women of Color in Business: Cross Generational Survey, released April 22, in co-sponsorship with the Executive Leadership Council, asked nearly 2,500 respondents across all generations about their workplace experience in 2020. For example, 46% of Black women surveyed said they were frequently or always the only person of their race in a professional setting, down just one point from 2019. "To win the race for exceptional talent, leaders and managers must become comfortable with hiring underrepresented minorities in multiples, providing honest feedback and stretch assignments, and creating an inclusive environment for ideas to flow freely from all employees across all generations, genders, and races," according to the authors, Harvard Business School alumnae Bonita C. Stewart and Jacqueline Adams. Stewart is the vice president of global partnerships at Google. Adams is a communications strategist after more than two decades as an Emmy Award-winning CBS News correspondent.

Leaderboard

David M. Lowe was named CFO and treasurer at Graco Inc., a manufacturer of fluid handling equipment, effective June 10. "The moves are in alignment with Mark W. Sheahan moving from the CFO and treasurer role to the president and CEO role on June 10," the company said in an announcement.

Anthony Brenz was appointed to the newly-created position of CFO at Robotic Assistance Devices, Inc. (RAD), a wholly-owned subsidiary of Artificial Intelligence Technology Solutions, Inc. Brenz most recently served "as vice president and director of a $200M subsidiary of a publicly-traded, automotive supplier," RAD said in an announcement.

Overheard

"The system learns how people negotiate. It tries different strategies and tactics and gets better with each subsequent negotiation."

Martin Rand, cofounder of the startup Pactum, on how the company uses A.I. and a chatbot interface to automate contract negotiations for some large corporations, including Walmart and Wesco International, an electrical equipment distributor, as told to Fortune.