You might be reading this blog on your iPad or MacBook. And chances are your iPhone is within arm’s reach. As one of the world’s most valuable and recognizable brands, Apple has recently pledged to consider women and minorities as board candidates. And it’s about time.
After criticism from shareholders (Trillium Asset Management and the Sustainability Group) who claimed Apple has too many white men in board and executive roles, the board charter verbiage will be amended to say, “The nominating committee is committed to actively seeking out highly qualified women and individuals from minority groups to include in the pool from which board nominees are chosen.” The statement was part of the company’s existing proxy.
We appreciate the impact of these shareholders’ voices, especially considering that Trillium Asset Management is a member of The 30% Coalition, alongside ION. Additionally, Larisa Ruoff, who runs shareholder advocacy and corporate engagement for the Sustainability Group, hit the nail on the head when she said,
“I think a lack of diversity is problematic for all companies, but I think it’s very problematic for companies like tech companies that consider themselves innovative and on the cutting edge to be behind on this issue.”
Like Ruoff, we understand that gender diversity makes good business sense. In fact, there are several reports supporting the theory that a diverse board enhances company performance (financial and otherwise). But take one look at the corporate make-up of most of America’s top companies, and it’s staggeringly unbalanced. So now that the tech powerhouse has finally moved toward gender diversity, it’s time other corporations follow suit. Let’s take a cue from ION Executive Committee Member Jilaine Hummel Bauer (representing Milwaukee Women inc), who urges us all to find a voice for diversity within our unique roles:
- If you are an investor, do you consider company diversity policies and practices in making your investment decisions and voting your proxies? Do you look for opportunities to talk to board members and executives of companies about steps they are taking to increase the number of women on their boards and resources they can use to identify qualified women?
- If you work for a corporation, are you engaged in making sure that diversity best practices are adopted, communicated and followed? Do you look for ways to support, mentor and sponsor other women interested in serving on boards?
- If you are qualified and interested in becoming a director, are you taking advantage of opportunities to make your qualifications and interest more visible to those who identify or nominate board candidates?
- If you are a current director, are there steps you can take to increase the diversity of your own board and the boards of other companies on which your colleagues sit?
by Sarah Meyerrose, ION President
How can we step up to increase the representation of women in leadership?
That’s the question Elizabeth Broderick (Sex Discrimination Commissioner, Australian Human Rights Commission [AHRC]) asked herself – and others – more than three years ago. Since then, the AHRC has spearheaded a truly monumental campaign to increase the number of women in Australian corporate leadership. The AHRC Male Champions of Change1 webpage absolutely nails it: “If we want gender balance to be the norm in our organisations [sic], we must create the conditions and cultures that enable both men and women to thrive.” So how do we do that? AHRC and ION agree that we need to call on existing male CEOs and chairpersons to:
- Step up as leaders
- Create accountability
- Disrupt the status quo
- Dismantle barriers for careers
The Male Champions of Change report goes on to share the signatures of all 21 members of the initiative, featuring some of Australia’s most well-known names in corporate leadership. It’s inspiring, to say the least. But beyond its motivational power, the initiative sparks a clear connection between gender balance and the competitive advantage of a company (or even a nation). Considering the fickle US economic situation, our nation can’t afford to ignore the effects of positive performance that result from diversity of thought, approach and experience.
Along with my colleagues – including Gayle Anderson, Jilaine Hummel Bauer, Terry Barclay and Julie Graber – ION intends to take a cue from this initiative to strengthen our partnerships with national CEO/business organizations as well as support likeminded ION member organizations to partner with regional ‘male champions’ taking clear, sustainable steps toward gender diversity.
1. Male Champions of Change – November 6, 2013 (video), Australian Human Rights Commission.
by Sarah Meyerrose, ION President
Finally! Someone found a way to demonstrate an important insight. The article “Are Women Decision Makers More Risk Averse Than Their Male Counterparts,” was written by Dr. Renee Adams (pictured here), a professor of finance at the University of New South Wales’ Australian School of Business. It was recently published by International Finance Corporation’s in CG Insights, an online source where top corporate governance experts report on the latest research about corporate governance in emerging markets.
Personally, I never felt I was more risk averse than my male counterparts and never quite got why the literature said I was expected to be. The differences I did observe between men and women (all broad generalizations to be sure) in C-Suites is that women are much more open to listening to opposing points of view, willing to be persuaded to adjust their thinking on a particular action, and, most importantly, better at analyzing the true risks, short and long-term, that a particular direction might pose. These differences are also societal.
Our thanks to Shauna Morrison, COO of ION’s research partner GMI ratings, for forwarding Dr. Adams’ article. I hope you’ll read it and use it as a conversation starter.
by Jilaine Hummel Bauer, ION member at large
Corporate boards are increasingly focusing on individual skillsets when looking for prospective directors. According to a 2013 survey of more than 900 public company directors, the four most desirable attributes for board candidates are “industry expertise,” with 48% seeing it as “very important,” followed by financial expertise (41%), operational expertise (37%) and risk management expertise (36%).[i]
While there are important differences between the roles of mutual fund and public company directors, Susan Ferris Wyderko, President & CEO of The Mutual Fund Directors Forum (Forum), a non-profit member organization serving the needs of independent directors of over 120 U.S. mutual fund groups, observes that fund boards also focus on individual skillsets in searches for board candidates. Like public company boards, she says mutual fund boards want to reflect the mosaic of skills needed to properly perform their roles and responsibilities. According to Wyderko, experience in the financial services industry and financial, operational and risk management expertise are high on their lists. Investment expertise is an additional skillset desired because of the unique purpose of a mutual fund, which is to pool and invest the assets of shareholders rather than deploy shareholder capital in business operations.
Organized in 2002, the Forum provides education and outreach programs to its members, as well as opportunities for members to exchange ideas and views with one another, industry participants and industry regulators. Wyderko says that the Forum informally has helped its members identify qualified “independent” director candidates for a number of years.[ii] But given sustained member interest in using the Forum as a resource, it decided to provide this service in a more systematic way by creating a candidate database to streamline the process and facilitate the matching of candidates to a fund company’s specific criteria.
With profiles for more than 100 candidates, the Forum launched its database in September. Free to members and those whom they engage to work on board searches, Wyderko says the database also is available to non-members for a fee. Prospective candidates can currently be added to the database for no charge, although MFDF may charge a nominal fee in the future for candidates to remain in the database as a means to ensure that the database includes current information on candidates with an active interest in seeking a mutual fund board position.
As with a public company, a good “fit” is important to both a mutual fund and a prospective board candidate because, once a director is chosen, s/he may serve for a decade or longer. While some fund boards conduct the search process on their own and others rely upon attorneys or search firms to facilitate the process, Wyderko notes that the process can be time consuming and take as long as a year or more. Also, because securities laws impose additional and unique requirements for a director to be considered “independent,” in addition to desired skill sets and experience, fund director candidates are screened for business relationships, investments and other information that could disqualify them from acting as an “independent” director.
Given the unique nature of fund director duties, the MFDF is well positioned to assist mutual funds in identifying qualified board candidates. Prospective candidates with financial services industry experience that wish to submit their resumes can contact the Forum at firstname.lastname@example.org. More information about the Forum and the database is available at www.mfdf.org.
Jilaine Hummel Bauer is the founder of Bauer Consulting, which specializes in corporate governance and compliance and business process improvement. She appreciates the information Susan Ferris Wyderko, President & CEO of The Mutual Fund Directors Forum, contributed to this article.
[i] PwC’s Annual Corporate Directors Survey (2013, at p. 4) available at http://www.pwc.com/us/en/corporate-governance/annual-corporate-directors-survey/index.jhtml.
[ii] An “independent” director of a mutual fund is defined under the federal securities laws. In general, it means that the director cannot currently have, or at any time during the previous two years have had, a significant business relationship with (or own stock in) certain fund service providers or fund affiliates. Most funds are required to have a board composed of a majority of “independent” directors.
by Sara Meyer-Davis, ION Executive Committee Member at Large
The jury is in – diverse boards create competitive advantage versus boards that are more homogeneous. Numerous studies have demonstrated the business case. Here’s more recent evidence:
Accenture’s research shows a significant correlation between both the gender and the international diversity of a company’s executive board and stock market performance[i]. Catalyst finds that companies with the highest representation of women on top management teams experience 35.1% higher Return on Equity (ROE) than those with the lowest representation[ii]. McKinsey indicates that companies ranking in the top quartile of executive-board diversity have ROE 53% higher, on average, than those in the bottom quartile. At the same time, EBIT margins at the most diverse companies are 14 percent higher, on average, than those of the least diverse companies.[iii]
In addition, companies in the United States are under significant competitive pressure globally as more and more international competitors are actively moving to increase representation of women on their boards, thereby increasing their competitive position. The U.S. cannot afford to forego the positive performance effects that are proven to result from diversity of thought, approach, and experience, a direct result of gender diversity.
A wise colleague recently said, “All parties involved with the creation and functioning of Boards of Directors must make a personal commitment to moving the needle to increase diversity of American boards”. So here’s a simple way to make that personal commitment to move the needle: Institutionalize board diversity - build it into the Initial Public Offering (IPO) due diligence process. There’s no downside – it’s a corporate governance best practice.
In recent years, there have been as many as 500 IPO’s, per year, globally. This means that approximately 500 companies transition from private to public ownership each year. With an average of 10 members on each board, 5,000 new public board seats are established each year. If just some of those seats were filled with the untapped talent of women, the likelihood of moving the needle in terms of board diversity is substantial.
On the surface, the IPO is the point at which a public Board of Directors is created. In practice, however, private companies usually have a Board made up of early investors, friends, and mentors that automatically transitions to a public board at the IPO. Yet the job requirements, workloads and liabilities for directors on public company boards are significantly more rigorous than those of private boards.
Common sense would suggest that private board members are thoroughly vetted prior to transition to public board service. Common practice often overlooks this matter in the arduous, tedious and exhausting process required to successfully bring an IPO to market.
Unless board make-up, including an appropriate mix of knowledge, skills, and abilities, is part of a due diligence checklist, the board will be an afterthought-to the likely detriment of the company and its investors.
Admittedly, the due diligence around IPOs is immense and the funnel is narrow, as an investment banking syndicate is required to take a company public. The approximately 50 investment banks globally that manage most IPOs perform significant amounts of due diligence to mitigate their financial risk for underwriting the deal. And it doesn’t stop there.
All of a company’s “trusted advisors” converge in the process: Management’s Counsel, Issuers Counsel, Auditors, Tax Advisors, Risk Advisors and Regulatory Advisors. Any or all of these advisors, not to mention potential investors in the IPO, have a vested interest in ensuring the board is diverse, professional, and prepared to govern. Any one of you can just do it … add Board Diversity to your due diligence checklist!!!
[i] Accenture Management Consulting, “Phoenix Report: Part 1″, 2011.
[ii] Catalyst, “The Bottom Line: Connecting Corporate Performance and Gender Diversity”, 2004.
[iii] McKinsey & Company, “A business case for women”, 2008.
A variation of this post first appeared on the New York Times Opinion Pages.
Corporate executives are always on the hunt for strategic business plans. Fortunately, there is a financially-sound solution that is both innovative and under-used: elect more women to the board of directors. By making gender diversity a priority, companies on the verge of growth can follow in the footsteps of the corporations profiled in ION’s most recent report.
In Follow the Leaders: It Can Happen Here, ION recognizes 11 thriving companies that have experienced financial success and made gender diversity a high-priority business initiative. These well-known companies include Akamai Technologies, Alliant Energy, Cardinal Health, Coca-Cola Enterprises, Cracker Barrel Old Country Store., General Motors, Hormel Foods, H&R Block, HSN, Intuit and Xerox.
The days of diversity as a “feel-good” initiative are over. It’s time that companies large and small pay closer attention to the fiscal benefits of female representation in the boardroom. In fact, a 21st century boardroom must reflect the environment in which a company operates and competes. Here are some practical ways corporations can lead the pack:
- Make room for women directors – find ways to increase board turnover or increase the number of seats to fill
- Find new ways to identify board candidates – expand the search to include diverse candidates, various professional backgrounds. Look to forward-thinking nominating/search committees
- Don’t stop at one woman director – embrace diversity of thought as a strategic imperative for success. Aim for a critical mass (at least 30%) of women directors without adopting a “check the box” approach
- Look internally for talent – prepare and promote women executives for board service. Encourage all directors to be role models, mentors and advocates for mid-level and senior executives
Demonstrating positive business results should be reason enough for CEOs, sitting directors and investors to diversify their boards. With such shining examples of the business advantages offered by diversity initiatives, corporate boards have no excuse not to make this a priority in 2013.
by Sara Meyer-Davis, ION Executive Committee Member at Large
As an advocate for gender diversity in the boardroom, the Committee for Economic Development (CED) is a likeminded ally. Since 1942, the nonprofit has conducted research on major economic and social issues to inform/engage the business community and shape public policy reform. Their most recent report, “Fulfilling the Promise: How More Women on Corporate Boards Would Make America and American Companies More Competitive,” advocates for gender diversity in the boardroom as follows:
- Allocation of available resources – Corporate competiveness is based on the efficient use and allocation of resources. Without women on boards, corporations fail to get the most out of the expanding resource that is the talented female workforce.
- Mandated quotas for foreign organizations – Companies with all-male boards may find themselves trumped by foreign competitors who have improved performance through voluntary commitment or nationally mandated quotas.
- Relation to target audience – Some studies have found that women directors lead to better profits; and there is no question that diversity helps companies relate to a wider range of consumers, suppliers and other stakeholders.
So what can business leaders do to fulfill the promise of more gender diversity in the boardroom? First they must publically make the promise by setting clear goals for transparency and action. To create policy change, corporations must remain accountable by disclosing their nomination committee’s strategy for implementing diversity. Additionally, nominating committees and search firms must remain in close contact to keep gender diversity top of mind for both parties.
CED’s report also spells out several other methods to help businesses fulfill the promise for diversity, including a note about work-life balance and mentorship. There is no doubt that CED presents a compelling and balanced business case. I urge you to pass this blog post – and the CED report – on to your executive colleagues who can leverage the business imperative for the advancement of women in the senior ranks.
KPMG Reveals Insights and Leading Practices Reinforcing Need for Diversity of Thought
Change is the only constant in the realm of regulatory and legislative matters. Recently KPMG asked, more than 250 executives and board members how their organizations address the sometimes daunting new rules of engagement. “Adapting Business Strategy to the Regulatory Outlook” reveals that many business leaders see opportunity to spark innovation in the evolving landscape. From the development of new products or services to improvements in information management and data protection, respondents plan to ride the wave of change.
The study found that more than 90 percent of respondents agreed that these changes will keep impacting business decisions and will result in revamping traditional approaches to compliance, tax, IT and more. The authors further identified six leading practices to address this change, including the need for more innovation, collaborative internal systems, and shifting focus to view the interaction of corporate roles and functions holistically. We know that when gender diversity is present on executive teams and in the boardroom collaboration, innovation and risk management improves.
Today, what separates leading companies from their less adroit counterparts is the commitment to embrace diversity as a means to strengthen corporate governance, risk management, innovation, and growth. So as companies appoint new business leaders and board members, I encourage them to place emphasis on diversity of thought, experience, and leadership style, all of which is often embodied in gender, age, and ethnic diversity. I encourage all board members and executives to take advantage of the following resources:
- KPMG Institutes Online Community: Participate in webcasts and online events covering today’s most important topics; access premium content affecting your industry or organization; share your perspectives on critical business topics and industry issues; and more.
- Diverse Director DataSource (3D): Search the combined database of diverse qualified potential candidates and existing directors for individuals whose knowledge, skills and experience can bring fresh perspective to a boardroom and help a company achieve long-term, sustainable growth.
by ION Treasurer and President Elect Sarah Meyerrose
A recent article in the Korn/Ferry Institute Briefings on talent and leadership discussed the “real” reason why women aren’t advancing to the top, despite documented increases in capable, educated women leaders. In “Why the Gender Gap Won’t Go Away,” the author cites U.S. Department of Education data that women received 44 percent of MBA’s in 2007. Despite the fact that women are increasingly more equally represented as MBA graduates, Catalyst Research Director Christine Silva notes that,
“…even with their very first job after MBA graduation, women start from behind when it comes to level and pay — even after we controlled for prior work experience, industry, region and other factors. A lot of people suggest that if we just give it time, the gender gap will go away, but we see if you give it time, the gap gets wider.”
The article reiterates prior findings that the “reasons” for this gender gap include the lack of internal support by senior executives; women leaders’ tendency to appear less confident and more cautious than their male counterparts; and female executives’ lower aggression and risk-taking qualities compared to their male counterparts. At the same time these studies almost counter-intuitively note that women are equally effective as men when negotiating on others’ behalf because it’s “consistent with the expected female role of caretaker.”
The author goes on to reject accepted remedies to overcome these “deficiencies” arguing instead in favor of viewing them as “ideal leadership characteristics:”
“But from a different perspective, it seems obvious that being thoughtfully cautious, believing one’s accomplishments should stand on their own, avoiding bluster and self-promotion, and being more comfortable advocating for others than for oneself are ideal leadership characteristics, not signs of a lack of confidence, ambition or efficacy. It would be preferable if, rather than requiring sponsorship to compensate for these “deficiencies,” more companies began to recognize the value of such behavior in its own right and rewarded it accordingly.”
While each individual brings their own unique approach to leadership, we must continue to search and advocate for the key characteristics that are most effective in driving improved outcomes. Please accept an invitation to join with ION in leading your colleagues and organizations to focus on the need for diversity of thought, experience and style, in large part by advocating for gender equality in board rooms and executive suites. March is “Women Helping Women” month. Why not celebrate it by committing to sponsor and support a high-potential woman in your company or sphere of influence? You can make a difference in helping to narrow and eventually close the gender gap. Start today…you’ll be glad you did!
The energy of a new year often lingers through January, especially when we reflect on how far we’ve come and the opportunities that await us. ION’s eighth annual status report of women directors and executive officers of public companies in 14 U.S. regions, titled “Gender Imbalance in the Boardroom: Opportunities to Change Course,” summarizes this nicely. Published last month, the report recalls ION’s new organizational friendships, a fresh proxy toolkit and much more. You can download the full-color PDF or request printed copies to hand out at your organization’s next event.
For the first time, the release of ION’s report coincided with Catalyst’s release of their annual census on the number of women on Fortune 500 boards. This helped us get national attention in publications such as Forbes. Look for ION to form more mutually beneficial relationships in 2012 with like-minded organizations.
With a reach that exceeds more than 10,000 women nationwide, ION is prepared to raise the bar when it comes to advocating for gender diversity in the boardroom and executive suites. Can we count on your support? The ION website’s Events page is an excellent place to start. Check out “Unlocking a Source of Growth: Women in the Boardroom” at the end of January in Sacramento, Calif. and “Executive Presence: Being Perceived as a Leader” in Atlanta in February. In April, there’s “Roadmap to the Boardroom” in Baltimore and The Conference Board’s “2012 Women’s Leadership Conference” in New York. Most of these events are open to both ION members and non-members alike interested in learning more about what gender diversity means for their industry, organization and career.
As we continue to strive for a balance of patience and fervor for our cause, I’ll leave you with this question: What will you do to increase gender diversity in the boardroom in 2012?