by Cydney Posner
A lot has been written about the benefits of gender diversity on boards. As discussed in Bloomberg, while “[e]quality is a worthy goal on its own terms, of course….for the corporate world, the better rationale for gender diversity is financial…. Companies with at least one female director had better returns for six straight years.” According to this Bloomberg Quicktake, a Credit Suisse study showed that companies with at least one woman board member saw an average return on equity of 14.1% from 2005 to 2015; all-male boards’ average returns were only 11.2%. (See this PubCo post.) Nevertheless, in the U.S., there is no getting around the continuing underrepresentation of women on boards. Bloomberg reports that women make up less than 20% of directors of S&P 500 companies, and growth in female representation has actually slowed. (See this PubCo post.) This article in the WSJ suggests some companies are trying new approaches in an effort to reverse that slide.
SideBar: As reported by the WSJ, academic researchers have found that, even though women board members typically “had deeper resumes” than their male counterparts with respect to academic qualifications and consulting experience and “won more shareholder votes during director elections,” among non-employee corporate directors, women directors earned on average $7,000 less a year than male board members.
What accounts for this continuing failure to increase board gender diversity? Low priority might be one reason. As discussed in this PubCo post, the PwC annual survey of almost 800 public company directors revealed that only 39% of directors surveyed viewed board gender diversity as “very important.” Some have argued that the problem is the absence of qualified candidates: in the 2016 Global Board of Directors Survey of more than 4,000 directors of both public and large, privately held companies from 60 countries conducted by Spencer Stuart, the WomenCorporateDirectors (WCD) Foundation and several academics (see this PubCo post), 39% of male directors in the 55-to-60 age group said the “lack of qualified female candidates” was the primary reason for the low numbers of female directors. However, 69% of female directors in that same age cohort attributed the low numbers to the failure to rank diversity as a top priority in board recruiting. But, as discussed in the article in the WSJ, some companies have taken the concern of those female directors to heart.
The WSJ article reports that a “small but growing number of U.S. companies have intensified their push to increase the ranks of women on their boards as businesses pay greater attention to gender parity at all levels. These initiatives are bearing fruit as companies revamp the way they recruit female directors.” According to the chair of the NACD, the “‘system produces white male candidates unless board leaders deliberately do something different’ [but] ‘people are beginning to figure out how recruiting more women to boards is done….’” Among the approaches discussed in article were restricting initial searches to women candidates only, following a practice of interviewing at least one woman for board vacancies and eliminating as a required qualification that director candidates have prior board experience.
One approach used by a recruiter who specializes in seeking qualified female directors is to present women-only slates for consideration. The recruiter, who has successfully recruited a number of women for board positions, “thinks boards will gain more gender diversity if they ‘interview all women slates before interviewing men.’’’ According to one company commentator, the “common requirement” that board candidates have previously served on a public company board “is one reason that boards have appointed so few female directors.” However, the article observes, “companies don’t always demand the same qualification for male directors. ‘Boards dominated by men have grown used to the male standard of congeniality and so accept a man who’s never been a director before,’ even though they usually reject women without such experience,” according to a governance consultant cited in the article. The article also provides a number of illustrations of successful recruiting of female directors using a version of the “Rooney Rule, which requires that at least one woman or underrepresented minority be interviewed for positions. The National Football League created the rule to ensure that teams interviewed minority candidates for head-coaching and general-manager jobs.”