In December, ION (the InterOrganization Network) released its 9th report on women on boards in the United States. ION is made up of 16 regional women’s networks, and this report used numbers from 15 of them. According to the research, the numbers haven’t moved much since the last report… or the one before that… or the one before that.
For example, larger companies tend to have more women directors than smaller companies, and there are fewer all-male boards at larger companies than smaller ones. In the Fortune 500, 16.6 percent of board seats were held by women. In the S&P 1500, 14 percent were women. In the Russell 3000, 11.7 percent were women. These numbers have shifted very little over time.
Obviously, this is frustrating – the slow pace of change here is the subject of lots of research and commentary. But instead of dwelling on the challenging numbers, ION’s leaders decided to instead focus on solutions. What are the companies that are getting it right doing? How can we convince other companies to do the same?
Sarah Meyerrose, ION’s President, explained, “I like the approach we took this year. We are focusing on the positives and saying ‘here are the companies doing a good job.’ We are well past the time when we are just talking about the numbers.”
In fact, she continued, “When we were putting the case studies together, I was pleased to see the number of companies we had to choose from that are moving the needle.”
Why are so many boards seemingly stuck in the past, with companies making little progress on gender diversity at the top levels? Meyerrose said simply, “Change is hard.”
She explained, “There are some who say that this network of people isn’t interested in making differences. But I don’t think that’s it at all. People know this is the right thing to do, but you can bring together smart people with good ideas, and that doesn’t mean it’s going to get adopted.”
For example, she pointed out that many people resolve at the beginning of the year to lose weight or quit smoking or stop drinking alcohol. “These are all good ideas, but how many of them actually get adopted?” she asked. Lowering the effort it would take to achieve greater board diversity might lead boards to do more.
“What can we do to create opportunities?” she continued. For example, one of the reasons that companies aren’t moving women into board seats is that men just aren’t moving out of them.
While the percentage of women nominated to boards in the US last year (about 17 percent) was proportionally close to the percentage of women serving on boards, Meyerrose believes that setting a mandatory retirement age or term limits for directors would help increase turnover, and thereby open up more opportunities for women in the long run.
“Some executives are willing to work well into their 70s,” she explained, and this decreases the opportunity for companies to hire more female directors. Of course, some directors may resist a move toward term limits if they are framed in terms of gender diversity. But Meyerrose believes such a change would benefit a company’s bottom line as well. “If you go back to the research that has been done globally and nationally, you’ll see that to continue to be competitive in a global environment, you need the best people and the best set of talents. The economic situation today is very different from what it has been in the past.”
“If you think of it in terms of competition, companies really do need a diversity of thought and perspective to address this sea change. You will make better decisions, you’ll be more competitive, and you’ll be more connected with your customer.”
But term limits won’t increase gender diversity alone. In fact, newer boards often lack diversity as well. Meyerrose explained, “When companies are forming their first boards, they need to think about how they are doing it. Do they have the right people in the right seats, with talent to match their expectations?”
That’s why it’s important for boards and companies to address the issue holistically. “Companies also need to think about the hidden barriers in their organization that limit the amount of women in executive suites,” she said.
Finally, she continued, the movement to increase boardroom diversity needs vocal supporters. “We encourage female and male directors to serve as mentors and role models. And we as women especially have to be courageous enough to say we need more women on this board. For any women in positions of influence, I hope we feel responsible to speak up for diversity on boards.”
Leaders in Board Diversity
The ION report includes profiles of several companies that have made significant headway on increasing board diversity. “They all had a slightly different story, but the commitment was there – to building the best, most competitive board. The talent they require is identified and then put on the board. And the results show it – all of them are high performers.”
One company named in the report, Cracker Barrel, named its first female CEO, Sandra B. Cochran, in 2011, and is only the second publicly traded company in Tennessee to have a female CEO. In fact, Cochran has helped reshape the company’s board since ascending to the top job, and as of November of 2012, the board is 30 percent female. “She took that step, and the stock price is up 65 percent over the past year.” Meyerrose added that while that success can’t all be attributed to board diversity, it certainly shows the board’s commitment to progress.
She also highlighted Coca-Cola Enterprises as a leader in board diversity, the only Georgia Fortune 500 company whose board is over 30 percent female. “The CEO and Chairman John Brock has been a strong supporter of diversity, and has said publicly that that diversity is not by accident, that it’s a business imperative.”
She continued, “And that’s ION’s message – we’re suggesting that companies do this because it’s a business imperative, and that it will make you a better company. It will likely help your financial results, and studies have also shown that it improves governance. What’s the downside?”