Here's why America's biggest boardrooms still cater to men ... for now

BizjournalsBusiness leaders have long highlighted gender diversity as a top priority, particularly when it comes to populating board rooms and the power center commonly known as the C-suite. Alas, women remain woefully underrepresented among the upper echelons of Corporate America.

 A Business Journals analysis of some 3,000 publicly traded companies with at least $100 million in market capitalization found the absence of women directors particularly pronounced among two classes of companies: those with relatively limited resources compared to their larger brethren and, perhaps not surprisingly, those run by male CEOs and board chairs.

Among those thousands of companies, male directors outnumbered their female peers by a six-to-one ratio at the end of 2017. The Business Journals also identified 710 boards that reported no women directors at all, and found another 1,034 companies with just a single woman director at year's end — meaning more than half of the companies analyzed had one or fewer women directors on their boards last year.

In contrast, the nation's 25-largest companies by stock market value averaged one female director for every four male directors, and posted an average of 3.2 women directors per board at the end of 2017.

Troubling Times

The lack of women in top leadership positions has taken on new relevance amid an expanding backdrop of high profile sexual harassment allegations in the workplace. In many of those cases, victims have repeatedly said they felt powerless to speak out earlier due to a lack of senior women leaders to turn to. But things might be changing.

"It’s easy to make superficial changes that don’t help anyone because a token woman or minority isn’t going to feel comfortable speaking out if they’re the only one there." Melissa Williams, a management professor at Emory University

A recent study by global recruiting firm SpencerStuart found that women and people of color were picked for a majority of open S&P 500 board seats for the first time in 2017, as large institutional investors have ramped up pressure on companies to improve gender and racial disparities.

That pressure is likely to increase following the wave of harassment claims in recent months, said Judith von Seldeneck, founder and chairman of Philadelphia-based Diversified Search, an executive search firm— Member of the Thirty Percent Coalition.

The recent focus on sexual harassment is going to do wonders to move the needle said von Seldeneck, who has herself served as a director on public company boards.

Pipeline Problems

Women currently hold 14 percent of all board seats at companies with more than $100 billion in market capitalization. That percentage averages out to about 1.3 women directors for the typical nine-member board, according to the Business Journals analysis.

The analysis also found that as a company's size dwindles, so too does its likelihood of employing an above-average ratio of women directors. For example, the biggest companies in the country — those boasting a market cap of $100 billion or more — saw 23 percent of their board seats held by women in 2017. That ratio steadily tumbled by size category, falling to 15 percent for companies with between $1 billion and $50 billion in market cap down to a low of 9 percent for companies in the $100 million to $500 million bracket.

The Bigger The Better: Board Composition By Market Capitalization

Companies with market caps above $50 billion averaged twice as many women directors as companies below the $500 million threshold. Analysts credit the difference to the greater public scrutiny that is applied to larger companies, as well as their ability to offer competitive pay to recruit from a traditionally limited pool of women CEOs and senior executives at U.S. public companies.

Celia Huber, a senior partner in McKinsey & Co.’s Silicon Valley office, said one reason companies struggle to hire women directors is because men grossly outnumber women in the workforce. Despite women representing 57 percent of college graduates, men continue to outnumber women at every level in corporate America. Huber added that men are also promoted at a much faster rate than women.

It’s even worse for women of color. A 2017 study conducted by McKinsey & Co. and LeanIn.Org found that women of color are the most underrepresented group in the corporate pipeline. Among 222 companies analyzed in the McKinsey study, women of color held just 3 percent of all C-suite positions, versus 20 percent for all women.

"Women fall behind early in their careers and continue to lose ground with every step, with women of color facing the most dramatic obstacles," Huber said.

Recruiting Advantage

Experts in the field of gender diversity say large companies tend to fare better with hiring women and minorities in part because they have more money to spend.

For example, top executive search firms often require a retainer of up to $100,000 and a percentage of the executive’s first year’s salary for a successful hire, making those services something of a luxury for smaller companies. The largess also enables big companies to spend more on director compensation versus their smaller competitors.

It pays to play with the big guys

Corporate directors at the 100 largest companies analyzed by the Business Journals averaged annual compensation of $379,084 in 2017, versus $186,801 for all public companies. Companies with market caps at the lower end of the spectrum, those reporting between $100 million and $500 million in value, averaged $113,548 in compensation per director.

Inclusion At Every Step

What's clear is that gender diversity begets gender diversity. The Business Journals research found that companies with a female CEO or chair average more than double the number of women directors than at companies run by their male peers.

On average, 24 percent of directors at companies chaired by a woman are also women. The percentage goes up to 27 percent when both the CEO and the chair are women, compared to 12 percent when both the CEO and the chair are men.

Board And Gender: It Starts At The Top

Companies with a woman CEO or board chair have nearly double the representation of women directors versus their male peers.

Deborah DeHaas, chief inclusion officer and national managing partner ofDeloitte'sCenter for Board Effectiveness, said the number of women and minorities on board-nomination committees also is steadily increasing, which should boost their representation in board rooms going forward. As of 2016, 20 percent of nomination committee chairs were women and about 10 percent were minority men, according to Deloitte research.

"It makes me hopeful that adding diversity in that role will help to increase overall board diversity going forward," DeHaas said.

Melissa Williams, a management professor at Emory University, cautioned that companies often confuse a few high profile appointments with diversity throughout their entire organization. She said women have to feel included at every step.

“It’s easy to make superficial changes that don’t help anyone, because a token woman or minority isn’t going to feel comfortable speaking out if they’re the only one there,” Williams said. “But if the board is saying we want to embrace the advantages diversity provides at every level, it can really change the culture of a company.”

Original article here

There should be an expectation in business that the selection process is based entirely on merit...Given the disproportionate number of men to women in senior roles, business should question the soundness of their meritocracies.

Sir Philip Hampton, Chairman GlaxoSmithKline

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