Gender Quotas in the Boardroom Keep Marching On

Businesswoman Addressing Meeting Around Boardroom Table In Smart/Casual Dresswear
Businesswoman Addressing Meeting Around Boardroom Table In Smart/Casual Dresswear

Many companies in Europe held their breath last week as Germany introduced a mandatory quota system assuring that 30 percent of supervisory board seats are allocated to women. While many European countries, including France, Spain and the Netherlands, have followed Norway's successful implementation of quotas for women leaders, business leaders and politicians in the UK balk at the very idea. Imposition by the EU of such directives is seen as unhelpful and blatant interference. The British have preferred to let companies go it alone, insisting that voluntary strategies are initiating change. This momentum is producing results. Prodded by organizations such the 30 percent Club's courteous yet weighty persuasion, the number of women in British boardrooms has doubled over the past five years to 23 percent.

Here in the U.S., quotas are seen by both sexes as distasteful. Government intervention and enforced regulation are despised. Angela Ahrendts, Apple's VP of retail and online stores, went as far as describing quotas as "dangerous." Federal agencies are viewed as bureaucratic and lacking any understanding of realities in the business world. Women too, aspire to get there in their own right, to avoid the blemish that they "weren't up to the job." Yet progress has been minimal. A disappointing 19 percent of board seats in the U.S are held by women. Boardroom barriers to gender equity on this side of the pond appear impermeable.

Not a week goes by without media mention of gender inequality in all walks of working life, including pay differentials, as well as the paucity of women in leadership roles. Investors continue to pressure chairmen to diversify their boards. And no wonder. A recent report by Credit Suisse emphasizes that shares of companies with gender-diverse boards, and with a market capitalization of more than $10 billion, outperformed comparable businesses with all-male boards by 26 percent worldwide over a six-year period. This study has made investors are acutely aware that companies with women in the boardroom analyze risk in more depth, unabashedly question strategic decisions, and are not shy to reign in CEO's who tend to shoot from the hip. It was this very stakeholder coercion, ironically through tweets, that initiated change in Twitter's board, which acquiesced to invite the UK's Dame Marjorie Scardino to join them. Formerly CEO of Pearsons, Scardino brings refreshing insights to the business, not because of feminine intuition, but strong business acumen. Importantly, she offers differing perspectives and leadership diversity to the table -− crucial dimensions of effective boards.

That is why data from recent research, The Better Boards Project, led by myself and Prof Cate Goethals was astounding. Interviews revealed that many all-male boards across five continents subtly resist initiating change to their homogenous make up. Seventy-two percent of male directors interviewed had not heard of similar statistics from prestigious organizations such as McKinsey and Harvard. Those who were aware of these studies tended to ignore or "pooh-pooh" research which highlights the positive impact of women on boards. Why is it that many directors around the world appear to be ambivalent as to the progress of gender equity in the C-Suite -- recognizing that things need to change, and at the same time bemoaning the dearth of qualified women? Perhaps, because over one third of the male directors had never served with a women director.

Even more disturbing is that the recruitment strategy in most boardrooms remains unchanged, confirming that the old boys network continues to thrive. Even when a headhunter is engaged, 71 percent revealed that their own personal network nominations usually land on the short list. One interviewee described the process.

"If your board is 80 to 90 percent white male and your recruitment process is just going around the table and asking 'Who would be good?' you will get a list that is 80 to 90 percent white male."

The majority of board seats in Fortune 500 companies are held by white males over 55. Board succession is now a regular agenda item for meetings as many directors shift into retirement. Inadvertently, this creates the perfect opportunity for increased gender diversity at the top.

Stakeholders -- investors, customers and the workforce are demanding change. The U.S. can't be seen to lag behind Europe. We need to rectify an imbalance rooted in dated stereotypes and male-dominated cultures. If quotas are not the solution, we need to revise recruitment strategies and processes, to ensure we find qualified women. Our research confirms they are out there. To continue to invigorate our competitive advantage, companies need to enhance board effectiveness to ensure sustainability. Gender equity is a proven strategy.