Reatha Clark King, a public company director for more than 30 years who recently stepped off the ExxonMobil board, has fought to overcome ethnic and gender discrimination since she was born in southern Georgia in 1938. A chemist schooled in the 1950s, King has persevered in science, academia and philanthropy to fulfill her desire to serve. Now a member of the NACD board, King— in conjunction with Spencer Stuart’s Julie Hembrock Daum— led a discussion of prominent public company directors on how to “move the needle” on women’s advancement into corporate leadership roles, where numbers continue to make them notable by their absence from top echelons. “We need to look beyond the numbers and ask why,” King said in her opening remarks.
Reatha Clark King
Progress for women has stagnated in the U.S. and in Europe, where some countries have mandated gender diversity, and where others— and the European Union itself—are considering similar measures. Some sector-specific groups are adopting voluntary measures hoping their actions will thwart regulations that require diversity compliance. While legislated quotas are considered highly unlikely here in the U.S., there’s little question that more needs to be done to promote greater boardroom diversity. In its annual analysis of the Standard & Poor’s 500, the Spencer Stuart Board Index rose from 15.9 percent in 2010 to just 16.2 percent in 2011. Similarly, among the Fortune 500, a mere 15.7 percent of all directors are women, according to the most recent Catalyst Census.
The business case for adding women to boards has been made. Data that correlate the number of women in leadership positions to corporate financial performance grows. A 2008 study by McKinsey and Co. found that companies with a higher-than average proportion of women on their management committees delivered the best performance. McKinsey data revealed that companies with more women on their boards outperformed rivals, with a 42 percent higher return on sales, 53 percent higher return on equity and a 66 percent higher return on invested capital. A 2007 Catalyst study reported that corporations with at least three female directors had “notably stronger financial performance.”
Daum worked briefly for Catalyst, a nonprofit devoted to helping advance women in leadership, before joining Spencer Stuart as an executive recruiter 18 years ago. Since then, she has placed 881 board directors, with 34 percent being women and minorities. She views the current stagnation in part as a matter of seat count. “Lack of turnover is a very big problem. The number of board seats open not just to women but all candidates is limited. You have to get renewal however you can,” she says. More diverse boards result from rigorous board evaluations, Daum asserts. “If we allow boards to think about who is in the room, we’ll get much better boards….If you’re on a nominating and governance committee, you should be pushing for serious board evaluations.”
Any change in business strategy should necessitate a conversation on whether the board has the requisite expertise to carry out its oversight mission. “After the annual or biannual strategy meeting, if this is the company’s strategy, what does this mean for the board?” advised Patricia Barron, who has served on public boards since the 1980s. “If you speak about board turnover in a business context, who can object?”
Age and term limits, still used by many boards, have become, in some directors’ views, a cop out for full-board evaluation. Although most boards evaluate individual directors, the continuation of age limits (used by more than half of boards) and term limits (used by almost 10 percent, according to NACD data), can make boards complacent about using their evaluation tools to the fullest. Holly Gregory, a partner at Weil Gotshal who advises boards on governance matters, says the downside for age and term limits is that they set the expectation for long tenure even though boards are elected annually in most instances. Instead, boards should ask themselves each year: “Do we have the right board to achieve the company’s current strategic objectives?”
Another barrier to women’s advancement in the boardroom— aside from the low number of board seats and complacency about turnover—is the legendary glass ceiling within companies. Bettina Whyte, a turnaround crisis-management expert whose first exposure to boards was as an interim CEO, points out that systemic issues cause more women to opt out rather than seek higher positions with greater operating responsibilities and a bigger salary. The male-dominated culture that permeates Corporate America at the highest level may thwart the ambition of some women, so it behooves companies—and boards as their monitors—to assess how leadership pipelines are being filled.
Looking beyond the CEO population could also refresh the very definition of what constitutes an “ideal” board director. If women aren’t making it to the top of the C-suite, then perhaps expertise other than experience as a CEO should be considered. Kalpana Raina recommends that looking in nontraditional places for directors will expand the candidate pool: “On one of my boards, we looked beyond sitting CEOs. Of the two candidates now being considered to join the board, one is a very young, serial entrepreneur and the other is president of a major university.”
Ellen J. Odoner, head of Weil’s public company advisory group and founding chair of her law firm’s women’s initiative, noted that, for the current generation at least, areas such as law may provide rich sources of women candidates who have the requisite business experience and judgment for board service. Virginia Gambale, a director at JetBlue, predicts that a paradigm shift resulting from the convergence of new technologies will force a different profile for director candidates. “We are at an inflection point,” she says, “because of the convergence of three technologies: social media, mobile devices and cloud computing. They will create fundamental changes for every business that will require greater diversity of competence on board.”
Companies need to be held accountable, but the question of how assertive women’s groups should be in “outing” boards lacking diversity stirred both agreement and debate. Some believe that a stick is more effective than a carrot. Patricia Flynn was among a group of Massachusetts-based business leaders who launched a grassroots campaign aimed at increasing the share of women on corporate boards to 20 percent or greater by 2020. In its efforts to educate consumers and others about the status of women on corporate boards, the group’s website (www.2020wob.com) highlights companies with at least 20 percent women directors (“W”) and those that have zero women on their boards (“Z” companies). Flynn reports that being singled out in a negative light has prompted at least one company to expand the size of its board in order to add a female director.
As King noted, “It takes one to get to two.”
Participants
Patricia (Tosh) Barron: Director, USAA, Quaker Chemical Corp., Ultralife Corp., Teleflex Corp.
Catherine Bromilow: Partner, PricewaterhouseCoopers
Janet Clarke: Director, Asbury Automotive, Unisys
Julie Hembrock Daum: Co-Leader, North American Board and CEO Practice, Spencer Stuart
Denise K. Fletcher: Director, Unisys
Patricia Flynn: Director, Columbia RiverSource Funds
Virginia Gambale: Director, JetBlue
Holly Gregory: Partner, Weil Gotshal
Leslie Heisz: Director, Ingram Micro, HCC Insurance Holdings
Cynthia Jamison: Director, Tractor Supply Company, B&G Foods
Steve Kalan: Associate Publisher, NACD Directorship
Reatha Clark King: Director, NACD
Catherine Kinney: Director, Metlife, Netsuite, MSCI
Olivia Kirtley: Director, US Bancorp, Papa Johns
Lynn Krominga: Director, Avis Budget, Sunrise Senior Living
Ellen Odoner: Partner, Weil Gotshal
Kalpana Raina: Director, Real Networks, Information Services Group, John Wiley & Sons
Henry Stoever: Chief Marketing Officer, NACD
Bettina Whyte: Director, Rock-Tenn, AGL Resources, Amerisure Insurance
Rosalie Wolf: Director, North European Oil Royalty Trust
Phoebe Wood: Director, Invesco, Coca-Cola, Leggett & Platt