Three Tips for How to Get More Women on Corporate Boards

The United Kingdom and Australia have significantly increased the number of women on corporate boards in recent years, while representation in the United States has stalled. Nneka Orji of The Glasshammer reports that female representation in the United Kingdom’s FTSE 100 company boardrooms increased from 12.5 percent in 2011 to 26 percent in 2016. Similarly, Alexandra Spring writes in the Guardian that 26 percent of the director positions in Australia’s ASX 200 companies are now held by women, with a target of 30 percent by 2018. In contrast, Linda Colby of Bloomberg News reports that only 19.9 percent of board seats in S&P 500 companies were held by women in 2015, up from 19.2 percent in 2014. At this rate, Colby notes, it will take more than forty years for women in the United States to reach 30 percent representation on corporate boards. How have the United Kingdom and Australia made so much progress? In the United Kingdom, the Davies Review found that setting a clear five-year target in 2011 of achieving 25 percent representation by women, along with a public commitment from senior leaders to proactively address unconscious bias and other obstacles for women, resulted in the increase. In Australia, research from 2005–2011 found that companies with more women on boards showed higher financial performance. This research led to a 2011 report that called for organizations to set numeric targets and report on them. Australia’s implementation of these recommendations also increased the representation of women on corporate boards to 26 percent in 2016. Why does it matter that more women be on boards? A 2016 study by EY and the Peterson Institute of International Economics showed that “companies with at least 30 percent women in leadership may boost profit margins by 15 percent.” In addition, an earlier study by the index provider MCSI found that companies with more women “delivered 35 percent better ROI since 2010 than those groups lacking board diversity.” It just makes business sense to have more women on boards—but talk won’t get us there. Here are three important components of what worked in the United Kingdom and Australia:

  • Setting specific and time-bound goals
  • Being transparent about committing to those goals
  • Building in accountability and linking remuneration to progress against gender diversity targets
These are important lessons for the United States. We have not yet made these commitments. Are there other steps that you think would increase the representation of women on boards? Please share your ideas in the comments section.   The image in this post is in the public domain courtesy of Hillyne Jonkerman]]>

Why We Need More Women on Corporate Boards

The wealth gap in the United States is outrageous, as highlighted previously by the Occupy Wall Street movement and progressive Democrats like Elizabeth Warren and Bernie Sanders. The pay of corporate CEOs continues to skyrocket, even when their companies underperform, while millions of citizens struggle to earn a living wage. The earnings of the middle class have been in steep decline, but corporate boards approve ever-increasing compensation packages for CEOs. I always assumed that if more women were on corporate boards, there would be a reversal of this trend—but new research shows the opposite. While past studies show that having more women on boards is good for company performance, Gretchen Morgenson of the New York Times reports that according to a new study, “companies with greater gender diversity on their boards paid their chief executives about 15 percent more than the compensation dispensed by companies with less diverse boards.” Why might this surprising trend be happening? Morgenson notes that while no one knows for sure, some experts point to the following possible causes:

  • Relatively few women (roughly 20 percent) serve on corporate boards, and those who do may feel pressured to go along with the “vote yes” culture of most boards in order to keep their seats.
  • The board compensation committee determines CEO pay, and women do not commonly serve on these committees, much less as chairwomen. Morgenson notes that last year, only two out of ten committee chairs of the most diverse boards were women.
  • The same women directors often hold multiple positions. Morgenson notes that nearly one-quarter of women directors at S&P 500 companies held multiple board seats compared to 19 percent of men. This group of women might be sought after because they do not rock the boat.
Many qualified women with C-Suite experience have not been tapped to serve on corporate boards. It seems likely that a larger proportion of women on boards will create space for more women to join together to resist the “culture of yes” and help bring CEO pay back to more reasonable levels. Token representation makes it difficult to speak out. Let’s keep pushing for more women on boards.   The image in this post is in the public domain courtesy of Benjamin Child.    ]]>