Gender Gap in the Boardroom
Written by Jan Jaben-Eilon Tuesday, June 21 2011
Despite an occasional monthly setback, as in April when only 24 women were named to corporate boards, after 26 were named in March, slowly the number of women on corporate boards is growing. But since the growth is so slow and the percentage so low, several organizations are working hard to increase both.
In 2008 The Chicago Network, made up of 427 of Chicago’s most powerful women, launched the Women on Boards Initiative to assist companies and their search organizations in finding qualified women candidates for board openings. Already the initiative has succeeded in placing seven women on boards.
“The Women on Boards Initiative was started by five women who dealt with corporate boards, either through being on a board or working with a search company for corporate boards,” explains Madeleine Condit, who worked for the well-known search company, Korn/Ferry International for 25 years.
“We wanted a model to tap into the expertise of women who were members of The Chicago Network,” Condit says. “We developed a template for women interested in boards to fill out, telling about their expertise. We began by letting members know we had the resources, and we let the search companies know. We tell them and CEOs that we have this service so when you have a search for a director, you can easily go through our membership to find someone to meet your specifications.”
Two years ago, the Women on Boards Initiative took the program even further.
“We developed an educational component, like a boot camp, for members to educate themselves on what is needed to get on a corporate board: How to write a résumé and what questions you need to be prepared to answer.
“In the two years we’ve been doing this, we’ve placed seven women on corporate boards. We had approximately 25 clients during that time. These clients have generally been impressed with our candidates,” says Condit, who adds that she’s “definitely seeing a trend to more women board members.” She explains that boards have needs for certain expertise, which change over time.
Charlotte Laurent-Ottomane, president of Boca Raton investor relations firm Nvestcom, says the needs are cyclical. “Years ago, it was essential to have a financial expert who could head up the audit committee. Then there was a focus on executive pay, so there was a move to have someone with a human resources background.”
Condit warns that corporations couldn’t and shouldn’t just look at gender. “It used to be ‘I need a woman,’ but we’re so far beyond that.”
Laurent-Ottomane heads the organization called InterOrganizationNetwork (ION), which was formed in 2004 and consists of 14 regional organizations in the United States representing more than 10,000 women in business across a wide range of industries. Through ION, these women combine their energies in advocating the advancement of women to positions of power in the business world, especially to boards of directors and executive suites.
According to ION’s seventh annual status report of women directors and executive officers of public companies in 14 regions of the United States, women hold between 8.3 percent and 18.4 percent of the board seats in all of the companies included in their research. In the Fortune 500 companies in the 14 regions, women hold between 12.6 percent and 20.1 percent of all board seats.
In the same regions, the percentage of companies with boards on which women constitute 25 percent or more of all directors ranges between zero and 29.4 percent. Conversely, the percentage of companies that have no women directors ranges between 8 percent and 50.6 percent.
The Chicago Network and Deloitte produce a census concerning women’s rise on the corporate ladder of Chicago’s 50 largest public companies. Although the 2011 census won’t be released until the fall, the 2010 census indicated women hold 15.3 percent of all director positions, up from 14.1 percent in 2009. And, women accounted for nearly 30 percent of all new board positions among these companies, up from 14 percent in 2009. These percentages reflect the highest number, 85, of women on boards since the group started tracking the numbers.
Nationwide, the percentage of women on corporate boards has hovered at 15 percent, Laurent-Ottomane says. “I think women are being recycled,” meaning that the same women are being named to multiple boards. “The notion that needs to be dispelled is that one needs to be a CEO to be a board member. We need to think outside the box. We hear from women who don’t want to be the token woman board member, but we have to be initially. Women are still not in the executive suites in large numbers, and if you’re picking from the “C” suites,” then it’s a problem.
Unfortunately, too often, corporate board members are brought in through the old boys’ network, Laurent-Ottomane admits. But she adds that it’s partially a generational issue. “Older CEOs say it’s not even worth discussing.”
The facts, however, prove them wrong. “There’s been research that establishes a high correlation between boards with gender diversity and a higher financial performance and higher return on investment,” Laurent-Ottomane states. “This is a very objective measurement. This is because women tend to have a different approach to risk. We’re more risk averse, and this balances out the group strategy; there’s a more balanced set of dynamics.”
Kate Benson, executive director of The Chicago Network, points to a 2007 study that Wellesley Centers for Women conducted. It showed that the number of women on a corporate board is what makes the difference.
“Based on interviews with 50 women directors, 12 CEOs, and seven corporate secretaries from Fortune 1000 companies, the study found that a lone woman can and often does make substantial contributions,” Benson says. “However, although two women are generally more powerful than one, it takes three or more women to achieve the critical mass that can cause a fundamental change in the boardroom and enhance corporate governance.”
Laurent-Ottomane explains it this way: “One woman (on a board) stands out. Two women are allies against the other board members. When there are three women on the board, it becomes a nonissue. That’s what we’re striving for.”
Although there’s been some progress in the United States, the momentum is really building internationally. WomenCorporateDirectors is the only global membership organization and community of women corporate directors, with more than 1,000 members who serve on more than 1,200 boards in 32 chapters around the world. The Wellesley report noted that an increasing number of countries around the world has addressed the underrepresentation of women at the top by enacting various statues and regulations.
For instance, France, Iceland, Norway, and Spain imposed a quota requirement. Other countries – Australia is an example – require companies to set and disclose their goals and their progress in reaching those goals.
In some countries – such as Denmark, Finland, Israel, and Sweden – companies are directed to take steps to assure some degree of diversity. Although similar measures are being considered in other countries, the closest the United States has come is with the Securities and Exchange Commission (SEC) now requiring listed companies to disclose the manner and extent to which they take diversity into account when nominating new directors. But it has left it up to each company to define diversity as it wishes.
Laurent-Ottomane says she doesn’t think quotas are the best incentive to companies to increase their female board membership, “but someone has to intervene, whether it’s the SEC or someone else.”
Meanwhile, women’s organizations around the country are doing what they can to reach the critical mass of getting more women on corporate boards.
Jan Jaben-Eilon was a founding staff writer of the Atlanta Business Chronicle. Since then, she has been the international editor of Advertising Age magazine and has written for such publications as The New York Times, International Herald Tribune, Washington Journalism Review, and Consumer Reports. She is the author of soon-to-be-published (There is) Life After Cancer. Jan and her husband have homes in Atlanta and Jerusalem.
