Women in the Boardroom: Lots of Talk, but Little Action
We’ve covered why ethnic and gender diversity are important for business success, and so have most other media outlets, especially in the wake of Silicon Valley’s much publicized “diversity problem.”
And yet, in spite of all these tough conversations, the status quo persists, especially in the boardroom and especially when it comes to gender diversity (or, rather, the lack thereof). According to Catalyst’s 2015 census, women are still woefully underrepresented on the boards of directors at S&P 500 companies, with men holding 80.1 percent of board seats and women only holding 19.9 percent of them. Catalyst, a nonprofit dedicated to workplace inclusion for women, also found that only 14 percent of S&P 500 companies had boards comprised of 30 percent women or more. Given that women account for roughly half the U.S. population, even 30 percent isn’t much to celebrate.
Companies Are Passing Up Chances to Add More Women to Their Boards
Brande Stellings, vice president of corporate board services at Catalyst, says that part of the reason why so little progress has been made is the low turnover rates of board seats. Every year, only 8-10 percent of board seats in the U.S. turn over. Because of this, there aren’t very many chances to get women onto boards where they are underrepresented.
“The majority of companies in the U.S. do not have term limits for their boards of directors,” Stellings says. “The opportunity to add a new director is very rare.”
However, even if we account for these low levels of turnover, it still seems that something more is at play here: Catalyst found that only 27 percent of new director appointments go to women, which means roughly three out of every four new appointments still go to men.
“We found that, even putting aside the lack of turnover, it doesn’t matter if companies aren’t using those opportunities to make a difference,” Stellings says. “We see this as a missed opportunity to make change.”
At this rate, the overall ratio of women to men on corporate boards won’t change very much. In fact, companies are essentially maintaining the status quo, rather than challenging it.
The Answer Lies in Changing the Compositions of Our Talent Pools
Aside from the structural barrier of low turnover, Stellings says companies face an even bigger challenge in the quest to reach gender parity: The networks most companies use to find new directors are generally dominated by men.
“Given the majority of board seats are held by men, there’s a tendency to replicate what you already know and who you already know,” Stellings says. “The women who would be great to be on board are simply not as visible or connected to the networks the boards are pulling from when they’re making appointments.”
If women were more visible in these executive networks, there would likely be more women directors. Of course, radically changing the composition of anyone’s executive network is easier said than done. What are people supposed to do – run out and look for women they can add to their networks? That would be pretty impractical (and also a little creepy).
Catalyst believes it has a potential solution to the problem of visibility with its Women on Board program. Birthed in Canada and recently launched in the U.S., the Women on Board program matches “board-ready” executive women with CEOs and board chairs in two-year partnerships. The CEO or board chair – usually a man, given the demographics of these groups – first acts as a mentor for the woman executive by helping her to define her board value proposition and identify companies for which she’d be a good fit.
But the second phase of the partnership is even more critical than the first, according to Stellings. Once value propositions have been defined and companies identified, the CEO/board chair becomes the woman executive’s sponsor.
“He really becomes … someone who advocates for her,” Stellings says. “What we’re looking for is for the CEO or board chair to introduce her to his network.”
In this way, the Women on Board program helps to slowly but surely expand executive networks to include more competent, accomplished, and highly qualified women who may have otherwise flown under the radar simply because executives and directors didn’t know of them.
According to Stellings, the program has been fairly successful – especially when it comes to showing executives and board members that there’s no reason why women should be passed over for director appointments.
“I talked with one sponsor recently, and he was blown away by how impressive his partner was,” Stellings says. “He said to me, ‘She doesn’t need me; she’s incredible.’ And, yes, she should not need him, but she does. He didn’t know who she was; his network didn’t know who she was. But now he knows her and the incredible business skills she brings to the table. Now he’s in a position to make a difference.”
Government Initiatives Can Help, Too
Stellings also believes the U.S. government can play in important role in establishing gender parity on corporate boards. Governments in other countries have already done so for the businesses in their respective nations. For example, France, Norway, and Germany have instituted quotas for businesses to meet.
That being said, Stellings doesn’t think quotas are a good idea for the U.S. We tend to find such things “unpalatable.”
Instead, Stellings thinks we should look to the U.K., which has implemented a highly successful and totally voluntary program.
Under the guidance of former minister Lord Mervyn Davies, many prominent business leaders in the U.K. came together to identify steps they could take to get more women on their boards and made a public commitment to reach 25 percent women on FTSE 100 boards by 2015. Even though the U.K. lagged far behind the U.S. in terms of female representation on corporate boards when the initiative first began, the nation hit this target and has since surpassed it.
Stellings says that Canada, too, offers a powerful example for the U.S. to follow. The government of Ontario recently enacted legislation that required listed companies to be transparent about representation on their boards. This disclosure initiative could work well here in the U.S.
“[Disclosure] is important because it can be hard to find information [about gender parity on corporate boards], and having companies go through the exercise of disclosing the information and thinking about it can push them to make changes,” Stelling says.
A system of government-supported targets – rather than quotas – coupled with public commitments, increased transparency, and more diverse executive networks, could be just what American businesses need to finally start making a serious dent in their gender diversity problems.