by Gael O’Brien
Consider that:
– Women hold about 15 percent of Fortune 500 board seats;
– Of the top 300 European companies, women make up about 12 percent of boards;
– In Asia, 1.8 percent of board slots are taken by women; and
– In Australia, women directors fill about 9 percent of corporate board seats.
Gender diversity in the boardroom is a global problem that over the last decade has gained momentum from a barrage of research from all over the world. The research continually points out the scope of the inequities, and raises more reasons why companies would be more successful if there were more female directors.
And as a rising tide does float all boats, the issue has broadened to include the disparity in ethnic diversity on corporate boards as well. About one in seven board seats on Fortune 500 companies are filled by minorities.
The issue has a chance to gain more of a foothold in the aftermath of the global economic meltdown because companies are more accountable to shareholders and stakeholders for demonstrating the kind of leadership that creates more sustainable business success.
And, with all that has happened, business as usual doesn’t move the trust needle higher.
Documenting the Case
Questions of fairness by themselves seem to get resolved at glacial pace. However, mounting documentation on the extent of the gender inequity has brought with it the attendant media attention that opens boardroom doors. The work of Nominating Committees has been moved into the public domain. Politicians, governments, investors, activist groups and others are saying things have to change.
An enormous body of research has accumulated: Often-cited studies have been undertaken by Catalyst, McKinsey, The Conference Board of Canada, The World Economic Forum Corporate Gender Gap Report, and Calvert Investments’ “Examining The Cracks in The Ceiling”. to name a few. Operating across the world where they have clients, executive search firms — like Heidrick and Struggles, Korn/Ferry and Russell Reynolds — and accounting firms — like Ernst & Young and Deloitte — are part of the information campaign writing articles, issuing or sponsoring studies, and hosting or sponsoring forums that address the value of increased corporate diversity.
Grass root activism to increase women’s presence on corporate boards and in C-suites continues to grow. Women’s organizations in Wisconsin, Pennsylvania and Maryland, for example, as well as strategic partnerships like the newly-created one between the mutual fund PAX World and ION add their efforts to those in Australia, Europe and elsewhere.
Gender diversity has become a political issue. Prime Minister John Key remarked, “when you look at the small number of women in the boardrooms of New Zealand’s top businesses (one in 12) you have to wonder whether….our companies are making the best use of the talent on offer.” Former U.K. Prime Minister Gordon Brown said last spring that it was “unacceptable that there were UK firms without any female board representation.”
Change is happening. Britain, Belgium, Germany and Sweden are considering some kind of mandated percentage of women on corporate boards. They are following the lead of Norway’s 2003 law mandating at least 40% female representation which Norway has achieved. Spain and the Netherlands have passed similar laws and France is moving toward approval of its law.
Benefits of Diversity
In the United States, the Securities and Exchange Commission (SEC) approved a new rule that went into effect in spring 2010 requiring corporate boards to disclose how diversity is considered in the director nomination process. SEC Commissioner Luis Aquilar, talking about the value of the new rule this month (November 2010), pointed to a study done by the California Public Employees’ Retirement System that found that companies with a high ratio of diverse board seats exceeded the average returns to the Dow Jones and NASDAQ indices over a five year period.
And for those who say they’d love to have a qualified woman or minority for a board seat but can’t find one, Agenda, a Financial Times publication, has tried to remove that barrier.
Agenda convened a panel of corporate governance experts, executive recruiters and diversity advocates, requesting they identify 100 carefully-vetted diversity candidates for board consideration. From a pool of nearly 300, 100 were ultimately selected. In the resulting “A Guide to Board Diversity,” the 100 candidates appear with picture and bio information relevant to their suitability for board consideration. Of the 100, there are 68 African American, Asian, Hispanic and Caucasian women and 32 African American, Asian and Hispanic men.
It is a start.
One of the most compelling reasons for diversity in the board room is the need for companies to benefit from the complexity of thought of their boards — not just leaders from different industries and skill expertise, but from qualified people with different ways of seeing the organization, with different paradigms and different points of view to process the same information and perhaps raise points that others might not have seen. That is the value of creating a diverse team – inevitably someone comes up with something that shifts the problem and collaboratively, a better solution can be found.
Board and committee chairmen might need to brush up on their facilitation skills to keep discussion on subject and moving toward resolution, but that is much easier to do than trying to compensate for thought capital not invited to the table.
Gael O’Brien is a Business Ethics Magazine columnist. Gael is a thought leader on building leadership, trust, and reputation and writes The Week in Ethics.
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