Women on Boards: The Number May Be Shrinking

In the boardrooms of Chicago’s largest public companies, we are seeing a disturbing trend. New data released by the Chicago Network in its 2006 census of Chicago’s top 50 companies reveal that, for the first time in nine years, boardroom representation by women declined—despite more board positions coming open. Equally worrisome, this comes just as the number of women in senior positions at companies in Chicago, Boston, Atlanta, Philadelphia and California is showing no progress or backsliding.

Conventional wisdom has long suggested that more demanding board requirements, combined with a desire for board diversity, would open the door for more women on boards. With sitting CEOs the most popular board candidates, and in view of the time constraints these CEOs face, nominating committees would increasingly look elsewhere for new board members.

But these openings generally are not going to women. Why not? One reason may be that women are even more scarcely represented among retired CEOs—the second most popular source of new board members—than among sitting CEOs. In addition, the increased scrutiny that boards are under means that nominating committees attach even higher value to previous board experience. If you have never been on a board, it is harder to get your first shot.

What’s more, perhaps the only people with less time for outside commitments than sitting CEOs are women and people of color in the executive ranks of companies. Their corporate commitments entail more than management and strategy. They must also be visible within the company and the community as mentors and role models for other people of diverse backgrounds. This means that they have time for at most one external board position. Since the pool of women in general, and women of color in particular, is limited to begin with, the numbers do not work in favor of large steps forward. In the Chicago study, only 14 percent of new board seats went to women—simply mirroring the current 14 percent representation.

All of this means that nominating committees need to be more imaginative and flexible about recruiting women—and instruct their search firm partners to do the same—if they are serious about tapping this reservoir of talent. You can’t be satisfied with the list of “usual suspects” for new board positions. You can’t rely solely on the people whom current board members know and recommend. Rather than just CEO experience, look for people who have “near CEO” experience—heads of major business units, CFOs and general counsels who partner closely with their own CEOs and board. Consider leaders at a large nonprofit or private company. This will broaden the pool of highly qualified people and open the door for women.

Boards should also explore new sources for ideas, such as boutique search firms or women’s networks in major metropolitan areas, which will assist in board search, or change the guidelines for your search partner. Rather than requiring that women simply appear on the candidate list, require that 40 percent of the candidates be women and broaden the description of qualifications. Push people out of their comfort zone and into a more creative one to find candidates who are not “business as usual.”

There seems to be a tendency among many companies to believe that once they have one or two women on the board, they’re done—that is, they have achieved diversity. This is one reason the number of Chicago women on boards has stagnated. But consider that 83 percent of consumer purchases are made by women, nearly 50 percent of equities are held by women, and more than 50 percent of the educated work force is now female. Women are represented among customers, investors and associates in much higher numbers than they are represented on boards.

Sitting board members can make a difference by encouraging their companies to make board service an option for high-ranking women and people of color. More than that, directors should help open doors. Outside board experience provides a tremendous learning and development environment, better preparing women for senior management positions.

The recent study “Critical Mass on Corporate Boards: Why Three or More Women Enhance Governance,” published by the Wellesley Centers for Women, points to the difference that having three versus one or two women on a board can make. Three women’s voices will be heard more fully, and their ability to contribute increases. Companies will benefit most from the women on their boards when their numbers more closely mirror women in important stakeholder groups.