Behind Closed Doors
In the past decade, the presence of women on the boards of public companies has been increasing virtually everywhere in the world — except in the United States.Internationally, the 16.6 percent of female directors serving on U.S. Fortune 500 boards falls somewhere in the middle; Japan sits at slightly over 1 percent and Norway at 40 percent. But that U.S. number is only 3 percent higher than it was 10 years ago. The numbers are surprising, considering:
- More women have entered the C-suites of major companies. The leadership pipeline has become decidedly more gender-diverse. Female directors have served as effective role models for corporate executives, and their visibility in leadership positions sends positive messages to investors and other stakeholders as well.
- Academics and governance experts have confirmed the impact of female directors, including improved board dynamics and decisions and increased attention to critical areas such as risk, ethics and compliance. Women also provide greater insight into the marketplace. In the U.S., women make more than 80 percent of all consumer purchases, are the majority of affluent investors, and out-earn their husbands about 40 percent of the time.
That said, two major issues still keep women from the boardroom:
- A misconception among executives that there’s a shortage of women qualified for board positions. This stems from an inability for people to step out of their comfort zone, particularly for white men accustomed to tapping a limited network of candidates. Many hold fast to a narrow definition of “peers” and place excessive weight on title and pedigree when considering someone new.
- An absence of urgency around the issue of board diversity. There is no internal or external force that threatens to disrupt the status quo. The U.S. does not mandate quotas like countries in Europe, Asia and the Middle East, and there are none in sight. No stock exchange or SEC disclosure rules require listed companies to include in their proxies and annual reports data on the gender and racial composition of their boards and executive suites.
Since legislation and Corporate America are falling short, it’s time for business schools to step up to the plate. Knowledge has the power to promote new ways of thinking. Education comes in the form of:
- Monitoring and publicizing data on the status of women on boards and the business case for greater diversity
- Offering programs that help prepare women for the boardroom
- Effectively integrating gender equality into management education for current and future leaders
Many schools get it. Universities such as Stanford, Northwestern, Harvard and Wharton offer executive education programs on corporate governance, financial literacy and the development of female directors. We worked with Bentley colleagues to develop the Census of Women Directors and Executive Officers of Massachusetts Public Companies. The report, published annually by The Boston Club since 2003, provides details on the gender composition of boardrooms and executive suites at the 100 largest public companies in Massachusetts.On a broader scope, the United Nations PRME (Principles for Responsible Management) Working Group on Gender Equality (co-chaired by Pat Flynn) is bringing together faculty and employers from across the globe to provide support and resources to better integrate gender issues and awareness into management education. A growing number of institutional investors and organizations such as The Thirty Percent Coalition and 2020 Women on Boards are also joining together to put pressure on companies with homogeneous boards, but their success has been fairly limited so far.It’s time for Americans — women and men — to help change what’s taking place behind closed boardroom doors. Patricia M. Flynn is Trustee Professor of Economics and Management; and Toni G. Wolfman is Executive Adviser at Bentley’s Center for Women and Business.