Balance in the boardroom

While California’s and Illinois’ unprecedented passing of bills which enforce mandatory levels of female representation on boards appears to have blazed a trail for gender diversity across the country

26-04-2019

Business

While California’s and Illinois’ unprecedented passing of bills which enforce mandatory levels of female representation on boards appears to have blazed a trail for gender diversity across the country, many states lag far behind and board diversity remains a hot topic across the country. Companies face increasing pressure to improve this diversity gap in an era of increasing investor pressure and changing demographics.

According to Catalyst, women currently hold just 4.8% of CEO positions at S&P 500 companies and data from governance research firm Equilar shows that among the Russell 3000 board seats, women hold approximately 18%.

Although figures are still relatively low in terms of females holding high ranking positions, there is a small but growing movement to mandate more women on corporate boards. Law SB-826, introduced in 2018, states that companies listed on major US stock exchanges who are incorporated in California or headquartered in the state must have at least one female director on their board by the end of 2019.

Similarly, Law H.B. 3394 in Illinois states that any public domestic or foreign company with headquarters in the state are required to have a minimum of one female director on its board of directors by the end of 2020. This will impact some of the largest corporations in the country including Walgreens Boots Alliance Inc, McDonald’s Corp, Boeing Co., and Caterpillar Inc.

Slowly but surely, boards are starting to recognize the value of having female representation at board level with some going above and beyond to enforce gender diversity. Electronics retailer Best Buy recently announced that Corie Bay will become CEO in June of this year, becoming the only female CEO in the S&P 500 to serve on a board with a majority of women directors. Bay will bring the total number of women on Best Buy’s board to seven out of thirteen.

General Motors also recently announced that women will comprise the majority of their board later this year due to the retirement of two male directors. GM will be joining a small pool of American companies with roughly the same amount of men and women around the board table.

Dr. Solange Charas, Human Capital expert in New York City, who studies the Board and C-Suite team dynamic impact on corporate financial performance, commented to In Touch:

“These laws are representative of changing times and attitudes in the boardroom. This shouldn’t be seen as just a box-ticking exercise. There are many compelling reasons to include more women on boards. It is a fact that women are better educated than men. Women hold 21% and 48% more undergraduate and graduate degrees respectively than men, and the relationship between education and economic growth is well-documented.

Women are also more entrepreneurial than men. The Small Business Administration reported that over the past 10 years, twice as many new companies were started by women than men. This means that women are greater job-creators than men and are in better touch with what consumers want;

And women are leading their companies to better economic results. According to several academic research reports, when one or more women are on a board, these companies significantly out-perform their competitors: 26% better share price performance, 33% higher price to book value ratios, and 4% better average growth rates ROI performance globally."

Although diversity is something that boards need to acknowledge, it should never be about meeting quotas - but focused on bringing together all groups for inclusive communication that brings new levels of performance to the table. Board diversity is about advancing businesses to new heights by bringing together thought leaders who share different perspectives and voices. Businesses that fail to grasp this are unlikely to survive.

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