The past decade has been one of off and on again dialogue regarding diversity in the corporate boardroom. There is plenty of evidence that a diversified boardroom leads to better corporate performance. At the SAIS Global Conference on Women in the Boardroom, September 20th this year, the conclusion is that it's time to stop talking and start acting.
According to Bill McCracken, former Chairman and CEO of CA Technologies, "increasing the number of women on corporate boards is not a philosophic discussion." He continued, "It is about putting incredibly skilled and talented women in the boardroom. Women comprise 50 percent of our working population. The time for discussion is over. We need a National Task Force to drive a game plan that will increase the number of women in our corporate boards, not to talk about it more."
The evidence that diversity has a positive effect in the board room is documented in the Catalyst study that revealed that boards with three or more women in the boardroom have 53 percent higher return on equity, 42 percent higher return on sales and 66 percent higher return on Invested capital.
Global studies have shown similar results, and have had an impact on the policies and actions in other countries in which board diversity exceeds that currently attained in the U.S. These countries have not sat idly by and waited for the market to take its own course. No, many countries have implemented quotas, goals, stock exchange reporting requirements and formed business groups to push diversity forward.
Norway set the pace when in 2003 the government declared that 40 percent of the public corporate board seats should be occupied by women by 2007. In the face of much skepticism, they actually achieved that goal by the designated date.
The UK took a different tact. An independent commission organized by Lord Davies (The Davies Commission) set a goal of having 30 percent of the public corporate board seats filled by women by 2015. While this was not setting a quota, it garnered a lot of public discourse. It was followed by the UK Corporate Governance Code issued by regulator Financial Reporting Council that requires companies to comply with this goal or explain why not. Holding companies publicly responsible for reporting their board diversification has had a positive effect. Women now hold 17.4 percent of the public board seats on the FTSE 100, an increase of 12.5 percent since 2010.
Across the board, countries that have implemented board diversity policies are making progress toward this goal. According the Spencer Stuart Board index, the U.S. stands at women holding 17 percent of the Fortune 500 board seats. In Norway, it's 40 percent, Finland, 27 percent Sweden 26 percent and France 22 percent and climbing.
The truth is that countries from Denmark to Indonesia, Brazil to Jordan have taken public action to prompt diversification of board members. Some are mandatory, some voluntary and some regulated by comply or explain requirements. The common factor is that companies are on the public record with what they are doing to implement board diversity policies.
So what do we do in the U.S.? In every committee and convening body discussion I have attended in the past several years just seems like people preaching to the choir. The people in the room are believers. The problem is that we are still a small minority and haven't brought those CEO's, board chairs, governance committee chairs and even search firms fully into the tent. Now is the time to do just that.
The National Task force recommended at the SAIS Global Conference on Women in the Boardroom must bring in CEO's from not only the Fortune 500, but from the Russell 3,000, the NYSE Euronext and NASDAQ stock exchanges, the government regulators and business organizations such as the Business Roundtable, the Conference Board and the Chamber of Commerce should have a voice. The tent must be large and inclusive. Only then, by engaging all these points of view on the national agenda, will we make any real progress.
Waiting for the market to take its due course is a road too long. The extended age limits for board members now reaching 75, the lack of term limits, the declining number of new publicly listed companies is declining. The odds are against us, unless we make this a publicly debated goal and implement it. Bill McCracken is right. It's time to stop talking and time for action.
Sign me up.