Earlier this month, in bold recognition of International Women’s Day, State Street Global Advisors installed a statue of a defiant girl standing in full Wonder Woman pose in front of the Wall Street bull. At her feet are the words “know the power of women in leadership.” Intending more than just a symbolic gesture, the world’s third-largest asset manager launched an aggressive campaign to encourage the companies they fund to add more women to their boards. Less than a week later, the world’s largest asset manager BlackRock followed suit. BlackRock noted that “diverse boards, including but not limited to diversity of expertise, experience, age, race and gender, make better decisions.”
Diversification has long been a mainstay of Wall Street, so it should come as no surprise that the world’s largest asset managers view diversity in leadership as a means to drive better financial performance in the same way diversity in securities can deliver better portfolio returns. The proof is in the numbers. Per a Catalyst’s research Companies with the most women board directors had 16 percent higher Return on Sales (ROS) than those with the least, and 26 percent higher Return on Invested Capital (ROIC).
So how many women directors is enough? The question summons a famous quip by Supreme Court Justice Ruth Bader Ginsberg. When asked how many women need to be appointed to the Supreme Court to achieve gender parity, she famously answered, “when there are nine.” Nine (or more precisely 9.2) also happens to be the average number of board seats for a public company in the US. That said, the current recommendation for female representation is far less aggressive. According to a study by MSCI, the answer to how many women is enough is three or more, or roughly 33 percent. Today, women represent roughly half that number – somewhere between 15-20 percent depending on the study.
On the surface, three seems surmountable, perhaps even low. After all, women make up almost half of the US workforce. But as one ascends the corporate ladder to the C-suite, the gender scale tips overwhelmingly toward men. Women only account for 15 percent of C-suite roles. And when you limit the ratio to operational roles that include P&L ownership, the number drops well below 10 percent. So how do we expect to fill 33 percent of board seats when the pipeline of women filling those seats is so small?
According to a study by McKinsey, America’s boards have a few options:
- Change the mindset
- Make diversity a priority at the board level
- Demand that every recruiting process include female candidates
- Expand the criteria
- Look beyond the C-suite for qualified candidates who have the right skills. Consider the level below C-suite.
- In addition to operational jobs, include support areas like Finance, HR and Legal to help fill roles that require audit, compensation or governance committee duties
- Maintain an active pipeline
- Partner with diversification programs focused on preparing women for board director roles
- Create a sponsorship/mentorship program at the Board level
With the supply-and-demand ratio greatly in women’s favor, there has never been a better time to seek a director position on a public board. I spoke with Broadrooms CEO Gerri Elliott, who has some great advice for women. Elliott honed an 8-step plan to gaining a board seat by earning herself not one but three board positions. She learned the hard way that the road to directorship is not an easy one. She started Broadrooms in hopes of paying it forward and making it easier for other women leaders to follow.
Her plan includes the following summary points (you can read her detailed advice here):
- Define your value proposition and your targets
- Ask for support of your leadership
- Cast a wide net
- Get some experience
- Gather your references
- Educate yourself before you start the process
- Get expert help if you need it
- Choose wisely
The dearth of qualified female board candidates is yet another reason for corporations to drive broader diversity at all levels. Corporate boards, executive teams and women all have a part to play in changing the make-up of today’s boards. Board members need to change their thinking, open the aperture and fill the pipeline. Executive teams need to elevate more women into profit-and-loss operational roles, while also offering mentoring, sponsorship and training. Women need to broaden their networks, seek training and gain the confidence to demand that most coveted seat at the table. Diversity starts at the top. Together we can change the equation and drive parity across the board.