The Glass Boardroom
Viewpoint
by Judy B. Rosener
Based on the latest Catalyst figures, women hold only 11% of Fortune 1000 company board seats, and 25% of Fortune 1000 companies still have no women on their boards.
Yet there appears to be a demand for women directors.
Julie Daum, the North American board practice leader at Spencer Stuart, says, “When I began working with corporate boards ten years ago, there was a reluctance to add women to the board. Many CEOs only added women as a response to public pressure. Times have changed. Now, we see an unprecedented demand for women as companies look to bring on a second or third woman.”
In Sweden and Norway, there’s been talk of legislating women quotas for corporate boards. But mandates shouldn’t be necessary, especially in America.
Carolyn Nahas, managing director of Korn/Ferry International in Southern California, says, “Today there is a greater demand for women because it is increasingly acknowledged that boards should reflect the American population and its customers & #379;not just because it’s the right thing to do, but because it makes good business sense.”
So if it makes “good business sense,” why are there still so few women directors?
Unfortunately, women with education, expertise and track records that qualify them for board membership remain at a disadvantage. In part, this is because those who make board appointments tend to look at candidates within their own personal and professional networks. These networks historically have not included women. While search firms include women in their director candidate pools, the disadvantage remains, because doing business with senior executive women is still a new experience for many men in client companies, and there is a subtle comfort issue that can’t be ignored.
Businesses need to take into account the following:
The labor pool argument. Women constitute a growing percentage of the labor pool, and many want careers, not jobs. They no longer are content to occupy staff positions that don’t lead to important line experience. Companies that have women on their boards send a message that women are valued in their firms.
The market argument. Women constitute a major, but still too often overlooked, part of consumer markets. I was once asked why a profitable automobile company needed more women decision makers, to which I replied, “If women designed cars, we’d have a place for our purse.” Clearly, board members don’t get involved in day-to-day marketing and sales decisions. However, the presence of a woman on a board makes it more likely that female market issues will be identified and addressed.
The governance argument. Perhaps the strongest argument for having women on corporate boards is that their presence often improves corporate governance. Not only do sexist language and jokes disappear, but the number and type of substantive issues that are considered is broadened.
Shirley M. Hufstedler, who served for many years on both the Hewlett-Packard and US West boards and currently sits on the Harman International Industries board, observed that women tend to listen more and see problems and solutions differently from their male colleagues. This expands and enhances board discussion and deliberation.
Jane Evans, who sits on the boards of Altria (formerly Philip Morris Companies), Georgia Pacific, KB Homes and PetsMart, says, “Women ask questions that men don’t think to ask, because women come from a completely different environment and vantage point.” This “outsider freedom” is a valued characteristic of independent directors, the type of director much sought after today.
A major study by the Conference Board of Canada in May 2002 suggested a strong link between female numbers on boards and good-governance credentials. The researchers found that 94% of boards with three or more women insist on conflict-of-interest guidelines, compared with only 58% of all-male boards; and that 72% of boards with two or more women conduct formal board performance evaluations, compared with only 49% of all-male boards. The study found female directors were more likely to pay attention to audit and risk oversight and control, consider the needs of more categories of stakeholders and examine a wider range of management and organizational performance.
At Wellpoint, the nation’s largest publicly traded healthcare company, four of its nine board members are women. Twenty-five percent of its executive vice presidents are women, 26% of senior vice presidents are women and 36% of general managers are women. If Wellpoint chief executive Leonard Schaeffer could find four women directors, it would seem other chief executives and nominating committees could find one!
The bottom line argument. “Companies that smash the glass ceiling also enjoy higher profits,” said Pepperdine University Professor Roy Adler, who studied the financial results of 215 Fortune 500 companies. Presenting his findings in a recent Harvard Business Review article, Adler showed that “the companies with the highest percentages of female executives delivered earnings far in excess of the median for other large firms in their industries.”
Similarly, the Canadian Conference Board found that companies with two or more women on their boards in 1995 were much more likely than companies with all-male boards to be leaders in revenue or profit six years later.
Two studies do not a theory make. But it is hard to ignore the evidence that putting women on boards makes good business sense.
Rosener is a professor in the Graduate School of Management at the University of California, Irvine. Her research, teaching and writing focus on professional men and women at work. This column is adapted from her article in the May issue of Directorship.
