With global competition, complex market challenges and a massively diverse global consumer base, few companies can afford board homogeneity.
By Lauren Leader-Chivee (CEO & Founder, All In Together)
A few months ago an important meeting took place in New York kicking off of the U.S. chapter of the 30 percent Club — a private-sector initiative to get more women on public company boards. The meeting was assembled by an extraordinary woman from the U.K. named Helena Morrisey.
You may not have heard of Helena, but in Britain, where she’s CEO of Newton Investments, she’s become a household name. Her initiative there is pushing to ensure that 30 percent of all corporate board seats are held by women. She’s well on her way to achieving the goal.
In the U.K. and Europe, the subject of gender diversity on boards has been front-page news for years. Due in part to the push from some governments and the European Union to set quotas requiring female representation on boards, many corporate leaders, including women like Helena who adamantly oppose quotas, are working to drive voluntary action.
She’s been remarkably successful. By enlisting the support and leadership of mostly male chairmen from dozens of FTSE 100 companies, in a short time the progress has been dramatically accelerated. This week the number of women on FTSE 100 boards climbed to 22 percent, and the last all-male board has committed to appointing a woman before year-end.
When she started three years ago, there were 21 all male FTSE-100 boards, and only 12.5 percent women held board seats. A remarkable achievement in a short time.
One might reasonably ask why this even matters. Indeed in the U.S., the subject of women on boards barely registers. It’s almost unimaginable to picture the U.S. Congress publicly calling for quota legislation as the European, French, German and English legislatures have! The private sector has been more interested, but there is still major work to be done before it has the full attention it warrants. Huge numbers of U.S. companies still have one or no women on their boards and aside from some occasional outcry in social media and from women’s groups this issue has not risen to the status here that it has elsewhere.
According to a 2013 study by Spencer Stuart, 93 percent of S&P500 companies have at least one women on the board, but only 18 percent of all board seats are held by women. Companies with women CEOs seem to be focused on board diversity. Among the small number of companies with female CEOs, nearly 30 percent of board seats are held by women. For women, this reality clearly frustrates, but it’s not unreasonable to ask why it even matters. Is this just a question of the right thing to do? After all, if women are 50 percent of the U.S. population shouldn’t they have a voice in America’s corporate leadership? There are at least three compelling reasons why this matters and why every company — no matter the size, industry or business — needs women at the top:
1. Companies with Women on the Board Perform Better Financially
A long list of studies have all shown that companies with women on the board perform financially better across nearly every metric. But companies with three or more women on the board dramatically outperform. While no one can prove it’s directly causal, all the data points to women bringing nothing but upside.
2. Companies with Women on the Board are More Innovative
It turns out you actually do need diverse perspectives to think outside the box and drive innovation. There’s strong evidence that companies with women on the board are more open to new market opportunities and novel business ideas. One reason is that women bring a personal perspective about market opportunities and customer segments their male colleagues may not see. This reality is also true for other minorities, but with women representing such a massive part of the global market, that insight is especially important.
3. Women Make Boards More Effective
Several studies have found that three or more women on the board makes the overall board performance stronger, with less conflict, better risk controls and more effective oversight. It’s also been shown that companies with women on the board are more likely to hold themselves and others to commitments for implementing strategy. With such compelling insight, why has the U.S. lagged so badly on this issue? One problem is visibility of the issue.
In the U.K., the government focuses on women as a way to ensure better governance and financial performance. This prodded companies to do something before they were made to. The other reason, though, is the pipeline. Traditionally, public board members are former CEOs and CFOs, but a very small percent of women have ever held those rolls, limiting the pool of eligible board members. Some argue that other kinds of leadership roles can effectively equip one to sit on a board. Barnard President Deborah Spar and Princeton President Shirley Tilghman both serve on public boards.
Looking to women sitting in roles like chief marketing officer and chief human resources officer — not to mention entrepreneurs — could add deep value to many boards–but the boards have to be open to it, looking for it and committed to it. With global competition, complex market challenges and a massively diverse global consumer base, few companies can afford board homogeneity. Ensuring gender diversity confers serious competitive advantage and financial gains. Why would any company not want that?