Women are a rapidly growing economic force in many leading and developing economies. In the United States, for instance, women have influenced or controlled nearly three-quarters of household spending for the past several years, and their spending share may be as high as 80%, particularly when it comes to grocery and other retail purchases.
It is critical for companies to ensure that they represent this important customer base within the boardroom. Without greater female representation on their boards, companies are losing out on not only an important segment of talent, but on a critical marketplace perspective.
While boardroom gender diversity has been slowly increasing, it remains modest in comparison to women’s influence on spending. Among S&P 500 companies, women account for 19.9% of directors; globally, the number is about 14.7%.
Getting more women serving on boards will take a proactive approach by both companies and female director candidates. Here are ways to build more momentum around this effort.
Companies Should Consider Female Director Candidates Using the Same Criteria as Male Candidates
As of May 2018, with the retirement of some high-profile female CEOs (among them, Meg Whitman of Hewlett-Packard), women hold 24 of the CEO positions in the Fortune 500, down from 27 at the start of the year. Not surprisingly, these top female leaders find themselves inundated with multiple requests to serve on company boards. Clearly, when companies want to add a female director, the first thing they typically look for is a woman who is a CEO.
But the fact is, there are many men serving on boards who occupy senior leadership positions other than CEO. So why, then, are women held to a different, higher standard when it comes to board service? One reason may be the unfortunate fact of corporate life that men are often promoted based on their potential, while women are promoted based on their accomplishments. So, if women have not first proven themselves as CEOs, they may be less likely to be considered as director candidates.
This thinking excludes many talented and qualified women who might be senior vice presidents or hold C-level positions other than CEO. Applying the same qualifying criteria to both male and female directors would increase the pool of executive women who bring talent, experience, and a diverse perspective to board service.
Companies Need Patience and Persistence to Change Board Composition
Changing a company’s board composition takes time. That’s not an excuse—it’s a fact. For companies within the S&P 1500 Composite Index, average director tenure is 8.7 years. While board diversity initiatives are closely watched by investors and activists alike, it can take several years of concerted effort before a board’s composition looks appreciably different.
This slowness, however, masks what I believe to be real progress. In 2010, women held 15.7% of board seats at major companies; today, that has grown to about 20%. But there has been a much larger increase in female directors than the numbers might reveal at first glance. A decade ago, it was not uncommon for directors to serve on as many as six or seven boards. The women who also served on multiple boards were, in effect, being counted multiple times (as were their male counterparts). Now, because of more stringent regulatory requirements, such as Sarbanes-Oxley, directors are serving on fewer boards. This means there are far more individual women directors in the mix, which indicates an encouraging trend in board gender diversity.
Keeping this trend moving in the right direction will require companies to stay committed to their gender-diversity efforts—and investors and activists should take a patient, but firm, approach to ensuring they do so.
Women Need to Develop Their Value Proposition for Board Service
As board recruiters will readily report, companies are eager to add female directors. Yet there are many qualified women executives who wonder, “Why doesn’t my phone ring?” This is the part of the process where women can be proactive. Unless a woman is a sitting CEO—a highly desired experience that speaks for itself—being considered as a director candidate requires honing a “value proposition,” which is the unique value she brings to a board.
It is important to note that there is a key difference in networking for a job versus positioning oneself for a directorship. At the executive level, getting a job is about being a leader. But as a board member, it’s all about expertise—in cyber security, digital marketing, emerging markets, or other sought-after specialties. In their oversight role, board members focus primarily on strategy, CEO succession and planning, and fiduciary responsibility.
One high-level executive I know shared her story of being very successful when it came to securing corporate roles; she had vast experience, incredible skills, and a huge network. When contemplating board membership, she thought it would be the same: just a little communication within her network and the phone would ring. But when nothing happened, she realized she needed to reach out strategically to an even broader range of people to communicate the value she could bring to particular types of boards and seek their advice. She ultimately secured a seat not only on the board of one company she admired, but a number of others as well.
Women Need to Be Selective about Their Board Membership
When women actively pursue board membership, they should be as discerning about the opportunities as the boards are in evaluating them. Candidates need to do careful due diligence before accepting a board role. There is a saying in board service that directors’ and officers’ liability insurance is meant to guard board members against the financial risk of serving on a board—but only directors themselves can guard against the reputational risk they take on when they accept the board appointment.
This is why it is so important for prospective board members to consider not only the company’s history and current situation, but also the company’s expectations of its directors. For example, does the CEO invite input and challenge, or is it expected that the board will largely serve as a rubber stamp for the CEO’s initiatives? One question for women to ask during the board interview process is, “Can you give me an example of a time when the board and the CEO disagreed?” Beware if the answer is that they never disagree. It is very difficult to get onto a board, but it is even harder to get off a board, so you need to select wisely.
Victoria Medvec is the Adeline Barry Davee Professor of Management & Organizations at the Kellogg School of Management at Northwestern University. She also advices CEOs and their reports on critical decisions and negotiations, at clients including GE, Merck, Hewlett Packard, Motorola and Microsoft.
Previously published in Kellogg Insight. Reprinted with permission of the Kellogg School of Management.