Ripe for Change: ION’s New Report Highlights Business Case for Diversity

By Tina Vasquez (Los Angeles)

The InterOrganization Network (ION) recently released its annual Report on the Status of U.S. Women Directors and Executive Officers and, as has been the case for the past six years the study has been conducted, the results aren’t much to be excited about. Or, as ION more optimistically states, the findings illustrate a “bleak landscape ripe for change.”

The Numbers

ION has 14 regions that are represented by their member organizations, these include: California, Chicago, Dallas-Fort Worth, Florida, Georgia, Kansas City, Maryland, Massachusetts, Michigan, Minnesota, New York, Philadelphia, Tennessee, and Wisconsin. In these regions, women were found to hold between 7.6 and 17.8 percent of board seats in the nearly 2,000 companies included in the study.

In Fortune 500 companies located in the 14 regions, women hold between 12 and 19.5 percent of all board seats, while in Fortune 501 to 1000 companies, women hold between 6.3 and 18 percent of all seats.

Often with the results, the bad outweighs the good. For example, companies with boards on which women comprise 25 percent or more range between 1.4 and 21 percent. However, the percentages of companies that have no women directors range between 11 and 55 percent. And women of color have even less representation. ION’s 14 member organizations report that women of color hold between 0.8 and 3.6 percent of the board seats of companies in their respective research pools. It was also found that between 32 and 70 percent of the companies surveyed have no women in their executive suites and between 60 and 78.1 percent of companies surveyed don’t have a single woman among their highest paid executives.

A new addition to this year’s study is a “Guys Who Get It” segment, which features 11 male business leaders who, according to ION, “understand the value of diversity at the top.” Some of the men include Douglas Conant, President and CEO, Campbell Soup Company, Eric Foss, CEO, Pepsi Beverages Company, and John W. Rogers, Jr., Chairman, CEO and Chief Investment Officer, Ariel Investments, among others. All of the companies represented by these men demonstrate a clear understanding of the business case for diverse leadership by aiming for increased diversity in the C‐suite and on boards of directors.

The Business Case for Diversity

According to Rona Wells, ION’s outgoing president, who has been with the organization in some capacity since its inception in 2004, the men included in this year’s report understand that the business case for diversity is key. “Some of the most important information to come out of this study is not stated, but implied,” Wells said. “When you read over the information and think about the findings, you’ll reach the conclusion that diversity is a business issue, not a social one. The interviews with the male CEO’s illustrate that; they’re using diversity to impact business results. I do believe that many feel diversity is a social issue; they simply get caught up in the urgency of the day-to-day politics of business.”

A five-year study conducted by the non-profit group Business Opportunities for Leadership Diversity (BOLD) states that during the 1990’s diversity rhetoric began shifting in order to emphasize the business case for supporting workforce diversity. Many studies seem not just to suggest, but to prove that diversity – from the bottom up – has a wide range of business benefits, including higher staff retention, reduced recruitment costs, a more satisfied customer base, access to a wider customer base, better supply chain management, increased revenue, and access to new ideas for development, process, and product development.

So, why is it that women continue to be represented in low numbers for director, executive officer, and other managerial positions despite these promising findings?

Because studies, such as the one entitled “Harnessing Workforce Diversity to Raise the Bottom Line” conducted by CREATE, an independent research center, also found that diversity management is a long-term process with no quick fixes and oftentimes companies who put forth diversity efforts encounter major obstacles along the way. The most telling of which, is that diversity also creates a culture of long working hours, which makes it difficult for women to aspire to these senior management positions. It leads one to wonder whether or not diversity efforts geared toward the upper ranks of companies will simply lead to the inclusion of more men, though from different racial and ethnic backgrounds, as opposed to including more women.

According to Amin Rajan, chief executive of CREATE and co-author of the study, companies are beginning to see that diversity in the workplace pays and that “instead of thinking about diversity in terms of equality – that is, in terms of the law or compliance – companies are now seeing it as an issue of merit and merit alone.”

Parlaying the Numbers into Action

So what can women do? How can women improve their chances of obtaining director and executive officer positions despite all of the cards seemingly stacked against them? According to Wells, there is no “silver bullet,” no one thing that women can do to fix the problem.

“Obviously, it’s not an easy question to answer,” Wells said. “Though there are things that women can do to help their cause. Networking, of course, is at the top of the list. Too many women think that if they do a good job they’ll get noticed, but that’s usually not the case. It’s also important to stick together; help the women beside us and by us, reach out a hand and pull them forward. Sometimes it’s also really just a matter of being in the right place at the right time with the right qualifications. If it’s like that in life, why wouldn’t it be that way in business?”

Another problem Wells is quick to point out is the lack of available, qualified women. “The pipeline’s not as full of women as it is of men,” she said. “We need to engage men and make sure they understand the importance of having women in the pipeline who are being considered.”

Another option, one that many companies overseas are pioneering, is the use of gender quotas to drastically improve the number of women in managerial positions. Due to the success of these quotas, many in the United States are left wondering if we should jump on the bandwagon.

As illustrated by ION’s latest study, the number of women directors and executive officers in the United States varies little – if at all – with each passing year. Though laws such as those passed in Norway in 2003 were controversial at first, they have proven to be a great success. As Wells commented, it may be worth looking into. “Although it would be best to get progress without mandates, I am beginning to hear more and more women say they are in favor since the pace of women increasing in leadership positions seem to be so slow.”