Uncommon Women

For those of us who monitor the number of women in the executive suite and boardroom, the announcement that Meg Whitman was stepping down as CEO of eBay after a long run was a disappointment. But, the very fact that gender was not prominently featured in the reporting on her departure is a measure of progress, because it was no longer deemed relevant. What is significant is the steady stream of evidence that diversity in the executive suite and boardroom makes plain economic sense. Looking at return on equity, return on sales, and return on invested capital, Fortune 500 companies with the largest number of women directors significantly outperformed those with the least representation, according to a Catalyst report in late 2007.

But, there remains a striking disconnect between this financial imperative and the actual numbers of women sitting in seats of influence. Across the country and throughout industry after industry, the numbers at the top are dispiriting. Consider Catalyst’s 2007 Census of Women Board Directors: women held 14.8 percent of all Fortune 500 board seats in 2007, compared to 14.6 percent in 2006. Almost no improvement. Or, take the report from the Alliance for Board Diversity, Women and Minorities on Fortune 100 Boards: between 2004- 2006, men maintained their overwhelming dominance as directors, with 83 percent.

Meaningful change will not happen without the full support of the CEO. Boards have a crucial role to play, too. What isn't measured doesn't happen. 

Clearly, the numbers indicate a glacial pace of change. My own experience working with men and women in executive positions and as a board member strengthens my conviction that women can and do make enormous contributions across all industries, as diverse as real estate and retailing and on issues ranging from compensation to product development. The discussion, which historically has been driven by the morality and ethics of including more women on boards, is now about how the presence of women can improve business performance.

Beyond Tokenism

We should be past the point when placing a woman—or, for that matter, an African-American or Hispanic— on a board is part only of a diversity push. This is tokenism, and breeds a nasty vicious cycle: “overboarding” by the very top women and minorities, and selfsatisfaction among other directors that they have done their duty by bringing in one or two diverse board members, which, of course, makes it tough for other women candidates to be considered.

The real reasons for women to be on boards are that we bring valuable business experience and a cultural perspective that is just as important as a director with an international or political background. Consider the economics: women are responsible for 85 percent of all direct consumer spending (more than $3.7 trillion) and influence 95 percent of all goods and services purchased.

In fact, the forces for change are genuine and taking root. The 10th annual census of Chicago’s largest 50 companies from The Chicago Network illustrates the encouraging news—and the scope of the challenge. The percentage of women directors has risen 43 percent over the decade, but still stands at only 14.3 percent of all directors. There are more women CEOs at Fortune 500 companies today than ever before, and they lead a thoroughly diverse set of companies in global industries, from agricultural giant ADM (Patricia Woertz), to Xerox (Anne Mulcahy), Pepsico ( Indra Nooyi), Kraft (Irene Rosenfeld), and Sara Lee (Brenda Barnes). But for all of the gains, the small total number of female CEOs at Fortune 500 companies cannot be ignored—13.

Perhaps more important is the sight of legions of women who now hold middle and senior management positions—CFOs, business unit heads, and the like. The Chicago Network’s 2007 Census reported that the percentage of women among top five executive officers has doubled over the past decade. This growing talent pool is vital: these are the kinds of candidates that will make up the next generation of CEOs and directors. With more companies restricting the number of boards their CEOs can sit on, new opportunities for women directors should open up to these executives.

Barriers to Change

With these encouraging signs, the pace of change must accelerate. Why haven’t more women been elected to corporate boards? One reason is that there are fewer sitting CEOs and retired women CEOs available to sit on boards. Until recently, these have been the most popular sources for new board members. Women faced a Catch-22: Previous board experience was important, and without that, getting on your first board was even more difficult. But, in recent years, as boards broadened their sights beyond CEOs, they’ve clearly failed to see the full array of highly qualified women.