For the most part, America’s largest companies agree that they need more gender diversity on their boards of directors. Even those who question the bottom-line value of diversity can recognize that having more women in leadership improves a company’s public image and offers a perspective that can help them better serve their female stakeholders and customers. While corporate America has made some progress toward bringing more women into the C-suite, gender parity in corporate leadership is still a distant vision. On boards of directors, women’s representation also remains low, with some major companies having not one woman on their board.
Furthermore, getting a seat at the boardroom table is only half the battle for women’s inclusion, as Kimberly A. Whitler and Deborah A. Henrietta discuss at the MIT Sloan Management Review. According to their research, more is needed for women directors to have a real impact on corporate governance.
There are three levels to progress for women on boards, Former Xerox Corp. CEO Anne Mulcahy tells the authors: breaking in, critical mass, and gaining influence. The true power in boards lies with a handful of select committees: audit, nominating/governance, executive, and compensation. Across the Fortune 500, 58 percent of companies have at least one woman chairing a board committee, but the numbers of women leading these key groups is far lower: Only 21 percent of nominating or governance committees have a female chairperson, Whitler and Henrietta find, and just 5 percent of executive committees. Meanwhile, women hold just 6 percent of board chair positions, and in half of those cases, it’s because that woman is the CEO of the company.
One reason why companies should strive for more women on the board is that they can help foster more women in leadership throughout the organization. According to various studies, companies with more women in leadership are more profitable and have a more positive public reputations. They also often bring a suite of skills that were not previously represented on the board before, such as risk management, human resources, compliance, and corporate governance.
Companies with male-dominated boards often claim that there aren’t enough women in the leadership pipeline, but that has proven to be a myth. Studies have also shown that men on boards still don’t recognize the value of adding women to their ranks, with a PwC study finding that only 24 percent believe having more diversity drives corporate performance and 38 percent believe that it can improve board effectiveness. Boards also tend to set qualifications for new members that hinder diversity, such as requiring that a new board member be a former Fortune 500 CEO: A group that consists almost entirely of white men.
Even for those women who do make it to the boardroom, Whitler and Henrietta’s research shows that obstacles remain to them really making a difference. To catalyze progress on this front, they offer some recommendations for what companies can do, such as developing ways to measure women’s influence on the board (as opposed to just representation), ensuring greater representation on the aforementioned “power committees,” and creating networks of women directors so that new arrivals to the board can benefit from the guidance and mentorship of their more experienced peers.