Don’t Have a Boring Board: Diversify

By: Beth Ehrgott, Director

Last week’s blog
focused on the need for providing mentorship to professional women.
Since we just celebrated International Women’s Day on March 8th, it
seems timely to address an area of inequality that still needs
significant improvement: increasing the percentage of qualified women
who serve on company boards. Although women currently account for about
48 percent of the work force, they have nowhere near that representation
at the executive levels or on corporate boards. The Bureau of Economic
and Business Affairs reports this month that fewer than three percent of
Fortune 500 CEOs are women and only 26 percent of Vice Presidents and
Senior Managers are female. A recent study by The Conference Board, a
global, independent business membership and research association, found
that the percentage of women on Fortune 100 public company boards has
risen painfully slowly in the last 15 years, from 9.6 percent in 1995 to
15.7 percent in 2010.

For nearly
every board and C-level executive search we conduct, we try to present a
diverse slate of qualified candidates. Although companies are rightly
concerned about board and management competence, and financial and
regulatory compliance, they also want their boards and management team
to reflect the diversity of their customers,  partners and the world.
Progressive companies strive to foster collaboration among disparate but
worthy ideas, and acceptance of different but valid viewpoints; and if
their board and executive team is not representative of the organization
and its values, then there is a huge disconnect, not only in how they
will make decisions but also in the eyes of their shareholders,
customers, strategic partners and employees.  Although lack of diversity
impacts the public perception of the company, its bigger impact is on
the company’s strategic vision and tactical execution of that vision.

Diversity of thought leads to better outcomes; open exchange of ideas expands and enhances board discussion and deliberation.

Companies
will benefit from focusing on increasing diversity at the board and
executive levels, not just for the purpose of increasing female
participation out of a singular focus or political correctness, but
because it makes good business sense: it increases the diversity of
input from intellectual equals. There is still a residue of unconscious
bias (men’s club comfort) that exists among decision-makers that
influences the recruitment of women to senior positions. Men have
historically held a majority of board seats and executive leadership
positions, and people tend to hire in their own image, fostering linear
thinking. We need to address head on that while although Men are from
Mars and Women are from Venus, there is a wonderful dynamic of
appreciating and learning from differences of thought processes, opinion
and communication style. From birth through adulthood, women are
socialized differently from men: generally, they tend to listen more and
talk openly about their issues and challenges, which is not typically
within most men’s comfort zone. Women also tend to ask different
questions than men, and they generally approach problem-solving
differently than their male colleagues.

One approach to increasing the percentage of qualified women serving on boards is championed by Viviane Reding,
the senior justice official in the European Union. With continued
disappointing results notwithstanding tenacious efforts for increasing
women’s representation in European boardrooms, Ms. Reding is seriously
considering legislation that would require a gender-diversity quota
system for corporate boards; specifically, that women constitute up to
60 percent of corporate boards. “There is plentiful evidence from
business consulting firms including McKinsey & Co., and from
Catalyst, a nonprofit research group, that companies with gender-diverse
management teams experience higher growth in their share prices,
better-than-average operating profits, and outperform their rivals in
terms of sales, return on investment capital and return on equity,”
according to the report. That research showed women asked more questions
and made fewer reckless decisions, evidencing that “women are not a
cost, women are a benefit,” Ms. Reding said.

Sylvia Taylor, Executive Vice President, Human Resources of The Weather Channel comments:

“In
today’s global marketplace where every competitive edge counts, the
ability to innovate and problem-solve by leveraging diverse
perspectives, thinking styles and experiences is an obvious competitive
advantage to any organization. Frankly put, talent does not come in one
gender, ethnicity or set of experiences. The Company that has the
ability to pull from diverse talent pools, positions itself to better
anticipate, understand, meet and create the needs of a diverse
marketplace. Having Women and People of Color not just in your
organization, but adequately represented at the Board and at the
Executive Levels, positions a Company to eliminate blind spots and
discern opportunities that the Company may not have otherwise
recognized. I firmly believe that companies that are the first to fully
capitalize on this talent lever are the companies that over the long
haul will outperform their peers in our dynamic global market place.”

The business case is clear, so what advice can we offer companies to improve diverse representation at the board level?

  • Stretch beyond your comfort zone and embrace distinct points of view.
  • Build a pipeline of female talent
    through advocacy and mentorship, targeting high-potential leaders early
    in their career development and incorporating board training as part of
    the leadership curriculum.
  • Always present a diverse slate of
    qualified candidates and consider candidates with relevant functional
    expertise, other than exclusively current or past CEOs.
  • Make board diversity a necessary component of good governance and tie it to performance and incentive compensation.
  • Educate
    corporate leaders with current research, data and metrics that reflect
    the positive impact a diverse board can have for the business and
    transform CEOs into champions and change agents.
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