Women on Boards: Are We There Yet?
Despite heightened attention to gender imbalances on boards, well-intentioned efforts to include women, and legislative successes, we are still far from reaching gender parity on boards.
The short answer is no. Despite the heightened attention to the issue of gender imbalance on boards, the thoughtfully articulated rationales for gender diversity made by researchers and thought leaders, the well-intentioned efforts of many forward-thinking board chairs and members, the many legislative successes designed to drive compliance, the increased desire of women to serve on boards, and the growing number of men willing to serve as champions for them, we continue to miss the mark. In fact, the argument could be made that the engine of progress has stalled and may need more than a simple jump-start.
How large is the gap we have to close? It’s big. At the current rate of change, it will be decades at best before we reach gender parity. According to Catalyst, a global nonprofit working to enhance the working lives of women around the world, while progress has been made in recent years, we have a long way to go. Look no further than their latest compilation in 2017 of the global status of women on boards:
- On a global basis, an MSCI study of 4,218 companies found that women held 15 percent of board seats (up from 12.4 percent the previous year). Of those companies, 73.5 percent had at least one woman director, but only 20.1 percent had boards with at least three women.
- In the United States, women held 19.9 percent of board seats at S&P 500 companies in 2015. Among those same company boards, 2.8 percent had zero women directors, and 24.6 percent had only one woman director.
- While Europe leads the way in placing women on boards, also in 2015, among the STOXX Europe 600, women held 25 percent of positions on Europe’s largest publicly listed company boards, which is an increase of 13.9 percent from five years ago. Nevertheless, women are much less likely to chair a board committee, and about 5 percent of those boards have zero women. Among Europe’s largest publicly listed company boards, 32 (5.4 percent) are men-only.
- In Australia, almost a quarter of the ASX 200 board positions are held by women, on par with Europe. While 10 percent of those boards had zero women, there was a bright spot: for the first half of 2016, women made up 40 percent of new board appointments.
- The Credit Suisse report on this issue found that women represented 3.5 percent of board members in 2015 in Japan, up from 0.9 percent in 2010. The report also highlighted the progress made in India, where women represented 11.2 percent of board members in 2015, up from 5.5 percent in 2010.
Is the business community unaware of the benefits of gender diversity on boards? Hardly. The benefits of greater representation of women on boards have been widely articulated. According to an analysis by McKinsey & Company, companies that have leadership teams in the top quartile of gender diversity were 15 percent more likely to have financial returns that were above their national industry mean. Moreover, researchers at the Peterson Institute for International Economics found that, for profitable firms, a move from zero to 30 percent female leaders is associated with a 15 percent increase in the net revenue margin.
What are the barriers to achieving gender parity? There are many, some of them systemic. The collective wisdom of those who champion this cause would indicate that chief among the hurdles to overcome are un/conscious bias; lack of commitment by board chairs and/or members to drive increased numbers of women; low turnover among board members; an over-reliance on “who you know,” which creates a “closed loop”; and a perceived smaller pool of female candidates from whom to choose.
There is some merit to the argument that there are fewer women CEOs to select from as board candidates. The dearth of women CEOs is, in part, the net result of a declining percentage of women leadership pipeline into the C-Suite and the CEO office: women are underrepresented beginning even with the first step into management that an individual contributor takes. Given the trade-offs of work and family that disproportionately impact women, the number of women diminishes over the course of their leadership careers, making it difficult to re-enter the workforce or progress as quickly as their male counterparts.
Another challenge for women is that, as research shows, men are often promoted on the promise of potential while women (and minorities, generally) are promoted after an established record of performance. Having said that, there are many women qualified to serve on boards; we just need to expand the frame through which we traditionally identify candidates. Women who have been successful regional or divisional presidents, chief financial officers, chief human resources officers, successful academics, entrepreneurs, and retired management consultants often make solid candidates and would bring a diversity of experience as well as perspective to the boardroom.
Is this challenge solvable? Many think so. President and CEO of The Conference Board, Steve Odland, who is a current board member of General Mills and the former CEO of Office Depot as well as AutoZone, has long been an outspoken champion for gender diversity on corporate boards. His work includes spearheading the “Every Other One” initiative, a campaign by The Conference Board’s affiliate, the Committee for Economic Development. The initiative is grounded in the belief that gender diversity on boards is a business imperative and that a relatively simple solution exists. Odland outlines the solution this way:
We're not asking for term limits, or for boards to add the expense of incremental positions, or for early retirement of male directors, although if companies took any of these actions it would accelerate the process. We're just saying: replace every other director, as he or she retires, with a woman. Hence we have entitled our initiative "Every Other One." If corporations adopt this model, women will occupy nearly a third of Fortune 1000 board seats in just a few years and over time will reach parity in the boardroom.
Maybe it is just that simple. When Odland wrote these words a few years ago, he advocated the initiative as one that companies could adopt as a New Year’s resolution. As this year comes to a close and setting goals again becomes front and center, board chairs and members as well as business executives should recommit to making board diversity a top priority in 2019. Clearly, the benefits to women, boards, the organizations they lead, and the shareholders and stakeholders they serve are too great to leave gender parity to chance.
Rebecca L. Ray is executive vice president, human capital, at The Conference Board. A former academic and corporate practitioner, she serves on AACSB’s Business Practices Council. Follow her on Twitter @RebeccaLeaRay.