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Women In The Boardroom: A Guide For Journalists

The media loves to write about the boardroom. It would help if they understood what really goes on there.

— Herbert Simon

The Consultant’s Tale

For a business journalist, writing about corporate governance is like a muscle car aficionado doing a story on the Prius. The plain truth is they’re bored by the boardroom.

It is why The New York Times and the Washington Post spice up corporate governance stories with a gender angle. According to the NYT, Sarbanes Oxley must seem like thin gruel compared to the more stirring theme, gender bias in ‘the boardroom to the bedroom’. Yet, doesn’t it seem a little a curious, the media rarely reaches out to actual board directors for their take on the subject?

The reason is not complicated. Journalists prefer talking to consultants. They are always reliable for a deadline quote, and there is an army of them trying to eke out a living at $1000 per hour, and their phones don’t ring unless they get good press. It hardly matters the consultants don’t serve on corporate boards and may be feeding confirmatory material in return for a nice plug. The goal of the article is to point the finger for gender imbalance at male bias, and now it has been confirmed by an expert.

That would be fine, except for two things. This isn’t what really happens inside the boardroom. And by focusing on the wrong issue, we enable the real problem to prevail.

An Inconvenient Truth

When they look at the board, most journalists see a monolithic group of men fighting for the status quo, limiting women to token roles. But the reality is boards of directors delegate the job of selecting candidates to the Nominating Committee. Yet, the Nominating Committee has the highest representation of women and women chairs of any committee. When the Nominating Committee presents a slate, it has total discretion over gender. If women aren’t on that list, it is the Committee, and never the board, doing the deciding.

The statistics don’t vary a whole lot when women are in charge. According to Spencer Stuart, of the 24 companies run by female CEOs, only two have female equality (or more) on the board.

It becomes obvious looking at these data, the challenge of gender balance must be something other than reluctance because the will is there. So why not the way?

The answer is simple, friction.

Nevertheless, It Persists

Women currently represent 21% of Fortune 500 board directors despite well-intended efforts to change board composition. If the problem isn’t going away, getting at the root of it will require actual boardroom experience to challenge corporate governance conventional wisdom. (Disclosure: I have served on 10 public company boards). As you’ll see, the challenge isn’t storming the gates, it is making them open wider and remain open.

So what are the real reasons vs. the myths that prevent women from serving on boards?

Bias: False. The average big company boardroom is nearly 100% compliant in placing a few women on their boards. According to Spencer Stuart, only 1% of S&P 500 boards do not have a female director. The challenge is getting them to go from one to many — and fast. To remedy this, we need to deal with the problems below.

Vetting: True. The process of bringing on a new director takes a year or more while the candidate meets individually with as many as 15 directors and members of the C suite. Directors are just as busy and have to travel great distances to interview. The turnstile moves slowly if your goal is to increase the flow of women. The answer is to have a squad of capable women candidates lined up in advance, just like a sports team drafting a player from the minor league (see part III of this article).

Qualifications: True and False. You don’t need to be an accountant or an MBA, which in theory opens the boardroom door to women from different backgrounds. Ironically, it can cut the other way. Lacking objective criteria, the board becomes tentative and will often go with people it knows. Men know men. Changing perception from business credentials to what Warren Buffett calls business savvy will help.

Hierarchy: True. If a CEO is rated superior to a CFO or a computer expert is rated higher than a marketer, more men will serve on boards. Not surprisingly, these skills are obsolete after a few years, so they should not be used as benchmarks. This is a holdover of both a military and an academic mindset and has no bearing on the capability of a board director.

Litigation: True. With unlimited liability for directors, any sudden change in the boardroom — including bringing on a number of new directors at one time — catches the watchful eye of plaintiff lawyers. It isn’t coincidental the plaintiff bar is a huge contributor to political campaigns. Every time a board is sued, the politicians’ cash registers ring. Bring this to the attention of your Congressperson or Governor.

Turnover: True. Despite the fact that female representation among new directors rose to 32% in 2016, average director tenure is in the range of 10–20 years. The answer to increasing the flow of new directors is either term limits (I suggest a maximum of 10 years) or board directorship limits (maximum of 2 outside boards per director).

Minority: False. (As in a voting minority). While it’s true that a minority of women on a board can be outvoted, boards operate on unanimity, and they won’t stop debate until there are no dissenting votes. Even as a minority, women have a strong say.

Seasonality: True. Directors are appointed once a year, only so many can be added on that occasion. This is one we may have to accept. Annual meetings aren’t likely to be held semi-annually.

Cost: True. The cost of a single board recruitment can run high as $100,000 or more. Spending a half million dollars to recruit 5 new directors is a nonstarter. Having that squad of candidates in my second point above is the answer.

Experience: True and False. Succession and compensation plans are pre-packaged by consultants. This lessens the need for specific experience and theoretically, diverse backgrounds should be welcomed. The flip side is when boards choose women, they draw from a very small universe of former CEOs and CFOs. Most of them are ‘star directors’ who hold several board seats, reducing the opportunity for more diversity. Board limits would help, more creative selection criteria would be good, too.

Size: True. Yes, it does matter when it comes to boardroom gender. Average board size is about 8 to 10 directors. It means turnover is complicated by tenure and the fact directors don’t leave boards prematurely. In fact, they may never leave until retirement, which hovers around age 75. Term limits and earlier retirement ages are answers, but expanding boards and developing a two tiered board structure (see part III of this article below) would help as well.

Regulation. True. After Sarbanes- Oxley, boards no longer have lawyers and bankers associated with the company as independent directors. Women make up half the lawyers today and many investment bankers. That eliminates them if their firm has done any work for the company. Boards have to grapple with having more non-independent directors, which is highly controversial in orthodox circles, or set up a two tiered board that accommodates people with close working relationships with the company.

Other parts of this article:

Part I (Silicon hypocrisy)

Part III ( a global solution)



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Jeff Cunningham

Writing about extraordinary lives. Came for the people; stayed for the stories.