Gender diversity on corporate boards: where does the US stand in 2014?

On September 16, the Johns Hopkins School of Advanced International Studies (SAIS) convened its fifth annual Global Conference on Women in the Board Room in Washington, D.C. The event served as a showcase for what is exercising minds in the United States when it comes to women’s low representation in corporate boardrooms and C-suites.

The conference opened with a broad question: Why has the U.S. made so little progress in including more women on corporate boards, particularly when compared to many European countries? While few participants were willing to draw a direct, causative line, the topic consistently elicited a fierce debate on the question of whether quotas or targets are the best mechanism by which to bring women’s board representation closer to parity with the general population.

Some European countries have enacted regulatory quotas for women’s representation on corporate boards. Norway has the strongest requirement, mandating that 40% of corporate board posts be occupied by women. France has nearly achieved 30% female board representation after enacting quotas in 2010. Meanwhile, João Vale de Almeida, Ambassador and Head of the Delegation of the European Union to the United States, spoke ardently about an EU directive currently making its way through the legislative process. The proposed directive would impose a 40% quota for women in the ranks of non-executive directors across the EU by 2020. The directive enjoyed overwhelming support in the European Parliament, according to the ambassador, but now likely faces a much more difficult debate before the council of ministers, where all member states are represented. Be that as it may, Almeida professed that the mere threat of imposed quotas had driven significant change among EU companies.

Many conference participants stated their opposition to quotas, yet also expressed their conflicting views on the topic. Variations on a particular refrain abounded: “I don’t like quotas, I just like what they do.” Beyond that general discomfort with regulatory constraints on corporate activity, several more existential arguments emerged against quotas. Donna James, board director for L Brands, Marathon Petroleum and Time Warner Cable, remarked that she could not see how it was possible to implement a quota regime for one underrepresented group without doing so for all of them.Following that logic, if the U.S. were to implement quotas for women, ethnic minorities, gender and sexual minorities, veterans, the disabled and so forth, it would create a compliance quagmire. James advocated a more integrated, goals-oriented approach to the problem.

On a related note, Christie Hefner, chair of Canyon Ranch Enterprises and former CEO of Playboy Enterprises, emphasised that a more holistic approach is imperative to driving real change, rather than a singular focus on gender equity. “The best way to accomplish our goals is to accept and embrace the fact that diversity is about more than gender diversity: it’s about age, background, country of origin, sector and Chief Technology Officers who are 32,” said Hefner. “This broad diversity is integral to success in the globalised, technology-enabled environment that we have today.”

Despite the fierce arguments on both sides of the quotas-versus-targets debate, it seemed apparent that the topic would remain academic for the foreseeable future, at least in the U.S. Most conference participants expressed the opinion that Securities and Exchange Commissioner Mary Jo White’s comments had made it evident that the SEC had no imminent plans to undertake any further regulatory initiatives on the issue of board diversity.

Many speakers emphasised the strong influence of shareholder resolutions and institutional shareholder engagement in promoting what change had transpired in the U.S. Hefner, however, offered a counter-argument to this position, positing that the role of institutional investors in this arena is actually diminishing. While she nodded to the growing influence of Sustainable and Responsible Investment (SRI) in driving change, Hefner called out the non-participation of retail investors as the next frontier. “Individual investors have not demonstrated a willingness to put their money where their mouths are. They look for performance, with an agnostic view beyond that.” Hefner also highlighted the countervailing influence of inherently short-term hedge funds. So long as opposing winds buffet corporate boards, the stronger force will prevail.

One provocative argument arose at the conference, but did not yield broader exploration. Many speakers remarked on mounting evidence that board diversity leads to improved performance across a variety of measures, including return on equity, net income growth and the reduced likelihood that a company will have to restate earnings.
In this light, session moderator Paula Dwyer of the Bloomberg View asked New York City Comptroller Scott Stringer if pursuing board diversity would thus constitute a fiduciary duty on the part of corporate management. Stringer responded that it would, but did not pursue the notion further.

Irene Natividad, CEO of Corporate Women Directors International, presented in detail on the international dimension of board gender diversity. Natividad provided data showing that while China and Japan account for a growing share of Fortune 100 companies, both countries perform at the bottom of the pack when it comes to women on boards. This situation is not inherently representative of emerging or non-Western economies, however: India has launched a veritable scramble among its corporations by mandating that all publicly traded companies have at least one woman on their boards.

Another more ethereal yet urgent thread ran through the conference, exploring what it really takes to drive fundamental change. In a variety of ways, speakers delved into the age-old truism that simply signing a policy statement doesn’t make the thing so.Many commented on what amounts to a crony mentality among decision-makers, and the human and interpersonal dynamics that ultimately produce genuine results. Speaker after speaker highlighted the tendency of corporate boards to recruit from among their own, existing networks, which tend to be “male, pale and stale.” (Speakers acknowledged corporate-governance champion Nell Minow for coining that pithy phrase.) Ultimately, a consensus emerged that change in board diversity – or in any aspect of corporate culture – can only come when it is embraced at the highest levels, and when decision makers actively choose to “fish in new ponds”, to work differently than they have before.

Debate will surely rage on as to the best mechanism by which to achieve said change. As things currently stand, said Laura Liswood, Secretary General of the Council of Women World Leaders, the current rate of change takes the Blanche Dubois approach: it relies on the kindness of strangers.

Sara Murphy is an independent consultant and analyst covering sustainability issues.