The Paul Hastings law firm recently released the third edition of, Breaking the Glass Ceiling: Women in the Boardroom, a study that focuses on the role that stock exchanges and their listing policies can play in achieving gender parity in boardrooms around the globe. Exchanges can help in the march towards a more diverse boardroom by including diversity figures in their listing requirements and/or punishing companies who don’t comply. Like any diversity initiative, the important question is, does it work?
If you’re tired of seeing headlines about the financial advantages and growth opportunities that women executives in the boardroom could deliver to businesses, maybe it’s time we flip that conversation on its head.
As much as highlighting the potential that companies could realize if only women were in the decision room, recent findings quantify the tremendous losses that companies are bleeding right now by their absence. The lack of women in boardrooms and executive positions is, plain and simple, being identified as self-sabotage for organizations.
Male-Only Executive Boards Create an Opportunity Cost
Recent research by Grant-Thorton has revealed that the opportunity cost for companies with male-only executive committees in the S&P 500, FTSE 350, and CNX 200 across the US, UK, and India was a whopping US$655 billion in 2014, and US $567 billion in the US alone, or 3% of GDP. The loss results from lower return on assets.
It turns out that talk is not cheap. When it comes to gender diversity at the executive level, talk alone is very expensive. (As is “action” that is PR-strong but falls short of robust follow through on outcomes.)
Only 35 of US S&P 500 companies have at least one woman executive in the boardroom (a far lower ratio than UK or India), but those companies with female executive presence on the board outperformed the all-male executive majority by 1.91%.
Francesca Lagerbeg, global leader for tax services at Grant Thornton said that corporate culture “kick(s) the can down the road” when it comes to board diversity not because they don’t know it’s necessary, but out of short-term fears of what it takes to implement real change.
“These companies are suffering now,” Lagerbeg says. “A lack of action now will make it all the more difficult to respond in the future when both problems are likely to be more acute.”
Executive Women in the Boardroom Equal Better Decisions
What’s noteworthy about this study is it hones in specifically on the presence of at least one female executive within the boardroom, holding female non-executives aside, as plumping up boardroom statistics mostly with female non-execs (UK) still leads to power imbalances on decisions.
“The research clearly shows what we have been talking about for a while: that diversity leads to better decision-making,” said Lagerbeg. “We only looked at listed companies in three markets and the figures are compelling. Now imagine extrapolating the results for all companies globally.”
The International Monetary Fund (IMF) recently asserted that more women on the boards of financial institutions leads to stability. Iterating opportunity cost, the IMF report states, “Women’s financial exclusion limits the growth-promoting potential of finance and it may also prove costly in terms of lower financial stability.” The authors wrote “…on average, stability is significantly higher in banks with a higher fraction of women in the board of directors.”
Research has also demonstrated that companies with a compelling track record of promoting female executives consistently perform better across 18 measures of profitability.
Despite This, Gender Parity Is A Long Way Off
It’s contrary to the nature of businesses not to evolve when compromised operational strategies lead to loss, but that’s happening on a macro level.
It will take 28 years to achieve gender parity in the boardroom at the present rate of change and that’s not even specific to executive seats.
Forbes contributor Sabina Nawaz asserts that real change will take more than current low levels of consistent jogging towards an abstract goal. Nawaz argues it takes real intensity, including: honest assessments of the presence of women in leadership roles, programs to meet quantifiable metrics by a determined date, and transparently published results. But too many companies are still talking and denying instead of committing.
What If You Don’t Want to Wait?
What about women who want a board seat and don’t want to wait until 2042 before it might be fair game? What about women who don’t want to wait for their company to catch up to the business impact of her voice?
Slow progress is not the same as no progress. This year, there are 11 women executives that are new to Fortune’s 2015 list of Most Powerful Women. Women are gaining ground on leadership positions within boards as well as representation on the committees that select new members.
Just because many companies are self-sabotaging their growth does not mean you have to do the same. If you want a board seat, beginning to make your bid is far better than biding your time until it’s easier to do so.
Forge Your Connections
Develop your connections to existing board members and seek sponsors. The recommendation of board members is the strongest factor in new member selection. If you don’t know the board, it’s unlikely they know you. Take the risk of going beyond your comfort zone with connections.
Be Visible
Janice Ellig, chair of the Corporate Board Initiative of the Women’s Forum of New York, recommends to “pat yourself on the back in a very visible and confident way.” Ellig advises women to “value their ambition” and “stand up and make it known” that you want a CEO or board position.
Actively Seek
Jan Babiak suggests that since 70% of board roles are attained through existing board/management networks, it’s important to cast wide. Connect with high-level professionals outside of your immediate field of work because opportunities may be found where you’re not looking.
All in all, it’s a wake up call to companies: Waiting for gender executive diversity to get easier? It’s a strategy that is costing you.
By Aimee Hansen
By Kayla Turo
We have long discussed the advantages of incorporating more women into board level executive positions, which includes professed benefits such as increased productivity, independence, and creativity, as well as a decline in the debilitating habits of “groupthink” and stereotyping found among ill-diversified boards.
The recent report “Women in finance: A springboard to corporate board positions?” published by the Association of Chartered Certified Accountants (ACCA), states that women with qualifications or a background in finance are more likely to attain executive board positions than those who come from other industries.
The ACCA conducted extensive interviews with three groups: eight female FTSE 100 directors, seven executive search consultants (ESCs), and five FTSE 100 chairmen to gain a better understanding of how finance plays a role in the appointment of new executive directors and what that means for women today.
Finance: The Universal Corporate Language
The report found that all three groups felt it was the credibility that accompanies financial knowledge that was an indispensable perk of having a background in finance. Having the “language” of finance eliminates some of the alienation that occurs for women on a male-dominated board and makes her more identifiable to these men.
The ACCA report indicates, a background in finance is generally viewed as a more masculine qualification, and therefore in the thinking of this report women having experience in finance may work as a “corporate translator” to bridge the gender gap in the boardroom. They purport that the ability to speak the language of finance garners approval from peers on a board
When striving for a board position, it is also helpful to know strategic players who can advocate for you and recommend you for the role. According to the ACCA report, “Networking, in particular being known as well as knowing those who are already in board roles, is essential. If individual women are not known to a chairman or fall under the radar of an executive search firm then it is highly unlikely these women will be considered for board roles.”
While all three groups acknowledge the benefits of having a background in finance in regards to credibility, the ACCA still found some difficulty in pinpointing what type of financial experience is most beneficial.
Following the interviews with these key stakeholders of a corporation the researchers found a “lack of clarity” in the definition of financial qualifications and background. However, certain statistics and comments gathered throughout the interviews demonstrate some of the common fields of finance that have worked for current female directors.
By Beth Senko
The push for increased diversity on corporate boards has been going on for some time. But the push for diversity hasn’t really reached the boardrooms where those shareholder votes are cast.
Last September, The Thirty Percent Coalition, a group formed in 2011 to address issues of gender diversity in the boardroom, congratulated eight companies for adding women members to their boards and noted that overall progress continues to be slow. However, there were a couple of bright spots:
“During the 2013 proxy season, shareholder resolutions on board diversity were filed with 25 companies. Of the 25 shareholder resolutions filed, 18 have been withdrawn based upon mutual agreements, an important mark of progress in the work on board diversity. Three board diversity shareholder resolutions went to a vote in 2013: proposals at CF Industries, Urban Outfitters, Inc. and Freeport-McMoRan Copper & Gold Inc. received support of 50.7 percent, 27.5 percent and 28.9 percent respectively. The impressive vote at CF Industries marks the first time a board diversity resolution has received majority support from shareholders.”
Many members of The Thirty Percent Coalition come from the institutional investing world and while its member firms lead in the area of board diversity, according to a recent study by BoardIQ, women may not be doing as well in the fund management boardroom as they are in the corporate boardroom.
BoardIQ studied fund filings on board composition of the 20 largest fund groups by assets and 125 other random boards overseeing assets ranging in size from $19 million to $193 billion. Their analysis showed, “nearly a quarter, including Pimco, DoubleLine and Fidelity Sector Funds, don’t have any, the analysis shows. Another 30% of boards have only one woman director.”
Put simply, 55% of fund boards examined have either one woman or none. In contrast, a 2013 study by 2020 Women on Boards shows that 43% of the companies in the Fortune 1000 index had one or fewer women board members. While the studies aren’t directly comparable, the twelve percentage point difference merits further study.
Is the problem a lack of qualified women candidates?
The BoardIQ study quotes Kristianne Blake, Independent Chair of the Russell Funds noting that board recruiting hasn’t changed that much over time. “I do feel historically the way board seats have been filled is the old boys’ network. It’s who you know.” At the same time, while the network expands when women are on the board, “the pool is smaller of women candidates, so boards have to make an effort to include them in the pool. You’ll have to aggressively look for women candidates.”
The number of women candidates available varies according to source. The University of Mannheim estimates that approximately 10% of equity fund managers are women. On the upper end, an estimate by the Mutual Fund Directors’ Forum says that women account for about one-third of qualified candidates.