Better Gender Balance in the Boardroom Linked to More Responsive Recall Decisions

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Better Gender Balance in the Boardroom Linked to More Responsive Recall Decisions

New INFORMS Manufacturing & Service Operations Management Study Key Takeaways:

  • Increasing the number of female directors on a company’s board results in less hiding of discretionary product quality problems.
  • Research shows that just one female director can help the company become more transparent in discretionary product quality problems, as measured by an increase in low severity recalls, but at least two female directors are required to influence how quickly company’s recall the most severe, life-threatening defective products.
  • Female directors may create better balance by helping managers consider customer safety and societal benefits in addition to financial losses from recalls.

 

BALTIMORE, MD, January 24, 2021 – New research in the INFORMS journal Manufacturing & Service Operations Management suggests adding women to a company’s board can help speed up necessary product recalls and increase customer safety and societal benefits. Companies also appear to be less likely to hide quality problems when more women are on the board.

“As boards add female directors, recall decisions change. Companies initiate more medical product recalls that are low in severity, which indicates a reduced tendency to hide quality problems that are discretionary. They also make faster recall decisions for the most serious defects that are high in severity and dangerous for customers,” says Kaitlin Wowak of the University of Notre Dame.

The study, “The Influence of Female Directors on Product Recall Decisions,” conducted by Wowak alongside George Ball of Indiana University, Corinne Post of Villanova University and David Ketchen, Jr. of Auburn University, analyzed more than 4,000 medical product recalls from 2002 to 2013 across 92 publicly traded firms regulated by the Food and Drug Administration (FDA).

The study’s results highlight prior research findings suggesting women in general are more likely to follow rules than their male counterparts and supports the authors’ theory that boards with more female directors will set a stricter rule-following tone than boards with few or no female directors.

“Our findings detail that one female director appears to significantly influence low severity recall decisions. This indicates that companies hide fewer discretionary recalls when women are added to the board. Interestingly, when it comes to severe recalls, at least two female directors are required to influence how quickly companies respond and recall,” says Ball, an associate professor in the Kelley School of Business.

Class 1 recalls are described as having very high stakes, because its high severity is tied with the negative effects the company feels after announcing them. This builds upon female director research that indicates one female voice may be inadequate to shape decisions that can be risky for the firm.

“Female directors may also help create better balance by helping managers consider customer safety and societal benefits in addition to financial losses resulting from recalls,” says Ball.

 

Link to full study.

 

About INFORMS and Manufacturing & Service Operations Management 

INFORMS is the leading international association for operations research and analytics professionals. Manufacturing & Service Operations Management, one of 17 journals published by INFORMS, is a premier academic journal that covers the production and operations management of goods and services including technology management, productivity and quality management, product development, cross-functional coordination and practice-based research. More information is available at www.informs.org or @informs.

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Contact:

Ashley Smith

443-757-3578

asmith@informs.org