Use Those "Binders Full of Women" to Fill the Boardroom

Green, Jeff. Bloomberg Businessweek, October 29 -November 4, 2012. “The Boardroom’s Still the Boys’ Room”. Pp. 25-26.

 While America’s workforce is so diverse in gender and culture, its corporate boards are still overwhelmingly filled with men.  Jeff Green of Business Week reports in “The Boardroom’s Still the Boys Room”, that it the problem is in the system and perhaps they can use Mitt Romney’s ‘binders full of women’ to increase board diversity  (Green, 2012, p. 25).  Rather than finding qualified talent, board members tend to recruit their friends to corporate boards using their “male-oriented traditional networks” according to Christine Allen, who sits on three boards. Yet, 45 percent of male directors blame a lack of experienced and qualified female candidates (Green, 2012, p. 25).

While other countries are forging ahead by putting quotas and terms limits in place to change the face of corporate board membership, the United States (U.S.) still lags behind, “11^th among other industrialized nations” (Green, 2012, p. 25). U.S. companies seem to be drifting in the opposite direction with only 12.6 percent of Standard and Poor’s (S&P) 1500 companies board membership being  women and only 21% of new members being female; 9 percent less than 5 years ago according to the Spencer Stuart Board Index (Green, 2012, p. 25).

Imposing term limits has enabled the United Kingdom (U.K.) to raise their female to male ratio to 17.3 percent in 2012, up from 12.5 in 2012 (Brady, 2012). Another problem in the U.S. is that once appointed to a board no one wants to leave, and why would they with an average pay of $227,250 per year for a few weeks of work? The average age of board members on S&P 500 Index companies is 62.6 years, with only 4 percent of those companies imposing mostly 10-15 years term limits (Brady, 2012).

Oddly enough, it is appears to be pension funds that are leading America’s push to increase board diversity.  The California Public Employees’ Retirement System and Global Market Insite (GMI) are collaborating to develop “their own binder of sorts”, of about 400 candidates to date in a central database called the Diverse Director Data Source (Green, 2012).

Additionally, companies with women board members perform better than similar “businesses with all-male boards by 26 percent worldwide over a period of six years, according to a report by the Credit Suisse Research Institute” (Perlberg, 2012). “Stocks of companies with women on boards tend to be a little more risk averse and (companies) have on average a little less debt” (Perlberg, 2012).

Some countries have set significantly high quotas of 40% of women-filled seats, which is resulting in less experienced boards.  A group in the U.S., 2020 Women on Boards, has set a goal to push for 20% of board sets to be filled by women (Green, 2012, p.26). U.S. companies can step up to the plate and set self-imposed term limitations and quotas themselves rather than wait to be forced to do it by entities such as, pension funds, interest groups, and government. As an added benefit, the changes may result in diverse ideas and better company performance.

References

Green, Jeff. Bloomberg Businessweek, October 29 -November 4, 2012. “The Boardroom’s Still the Boys’ Room”. Pp. 25-26.

Brady, Diane. Businessweek, September 20, 2012. “To Get Women on Company Boards, Make Men Leave”.  http://www.businessweek.com/articles/2012-09-20/to-get-women-on-company-boards-make-men-leave

Perlberg, Heather. “ Stocks Perform Better if Women Are on Company Boards”.  July 31, 2012. http://www.bloomberg.com/news/2012-07-31/women-as-directors-beat-men-only-boards-in-company-stock-return.html