Time for Women to Get on Boards—of Directors
Resourceful women should be taking steps to become board-ready, in order to take advantage of the increasing number of women elected to company boards, according to Molly Ashby, chairman and CEO of Solera Capital.
Even something like getting on the audit committee of a school would count as valuable experience that would increase the chances of being selected, she said.
“Women naturally think about CAC 40 companies, but that isn’t the right strategy,” added Veronique Morali, founder and CEO of Terrafemina.com and vice chairman of Fitch Group. Speaking at the Women’s Forum Global Meeting in Deauville, she advised women to “get experience at smaller companies or even non-profit companies and build up from there.”
Ultimately it is about being politely persistent in a way that demonstrates you are tenacious,” said Ashby.
The advice followed earlier words from Viviane Reding, vice president of the European Commission, who said business schools are on the verge of tackling female underrepresentation by launching courses to train them to be board-ready. But that prospect raised some eyebrows, with one delegate questioning why women should be trained for a role that men are not deemed to need training for.
There is compelling evidence that increasing the number of women on boards makes business sense. McKinsey conducted a study looking at companies for which information on the gender of senior managers was available. Those with three or more women on their senior-management teams scored higher across all nine metrics it used, including leadership, direction, accountability and motivation, than companies with no senior-level women.
A European Commission study showed that 58 percent of companies with diversity programs reported higher productivity as a result of improved employee motivation and efficiency, and 62 percent said that the programs helped attract and retain highly talented people.
“Diversity is an unbelievably powerful and creative force,” said Ashby. Having diversity in senior positions is especially useful for allowing companies to tap into the next generation of talent, she said.
Ensuring that a board is composed of people with a range of skills and perspectives is likely to make it more effective in its role of overseeing and questioning management. Female participation on boards could therefore be part of a broader change in the role of boards, restoring their lost function as overseers of management and protectors of shareholder interests, revitalizing the governance model. And if women are more risk adverse, that should rub off on companies.
There is a long way to go, and progress is likely to remain painfully slow. Only around 13 percent of board members of European companies are women, while in the U.S. the figure is around 15 percent. In Europe, women are closing the gap at a glacial 0.5 percent per year, meaning it would take 50 years to reach parity, said Reding.
One reason for this is the lack of turnover on boards. According to Julie Hembrock Daum, co-leader of Spencer Stuart’s North American Board and CEO Practice, only 272 board vacancies opened up in Fortune 500 companies last year. If even half of those vacancies were filled by women, it would still take a long time for women to get up to 50 percent of overall board composition.
But that situation cannot go on forever, even if many board members are staying on well into their 70s. In the U.S. the upcoming retirement of the baby boomers will create a large number of senior level vacancies in a short period of time, said McKinsey in a report. Nearly 20 percent of the U.S. working age population will be at least 65 by 2016, it said. That represents an opportunity for an influx of women into management roles. From there it will be easier to get onto boards.
In the meantime the threat of quotas looms large—in Europe at least. France has already gone down that route and has seen the number of women shoot up from 10 percent of boards to more than 20 percent. If companies to not take action themselves the European Commission will take regulatory action, warned Reding.