The new year is approaching rapidly and so it is appropriate that we plan for our resolutions. In the corporate governance world, one should be greater participation by women on corporate boards.
The good news is that, over the past decade, the percent representation has increased by a few points and women now represent about 19 percent of board positions. The bad news is that, at this glacial pace, it will take decades for women to reach parity participation.
Consider the importance of women in the U.S. economy:
But today, women hold less than one in five Fortune 1000 board seats. So women are the majority of our customers, employees, owners, and community. They form the majority of all corporate constituencies, and yet they are incredibly under-represented in the institution designed to guide the decisions that impact those very constituencies — the corporate board.
The case for increasing female leadership is an economic one. Clearly, we are under-utilizing our human capital. And unprecedented competition both here and abroad increasingly has made it a company performance issue. Boards sometimes can suffer from group think — they are at risk of not seeing and analyzing viewpoints that could strengthen their organization in the short-term and long-term. Broader insights are needed. Top-performing boards are ones that have diversity of input.
Lackluster progress in expanding the number of female board members has compelled some foreign nations to enact quotas for female directors. The U.S. would be mistaken to go down this path. Legislative or regulatory coercion isn’t part of our cultural DNA. We value merit – not mandates. Quotas also could lead to the perception of a two-tier board: those that became directors with and without the helping hand of the government. But if we business leaders don’t act on our own to address this issue we risk the government taking action instead.
One of the issues highlighted as a constraint by companies is the supply of potential women candidates. Boards often want candidates who have served on other boards and who are sitting CEOs of public companies. This is a “chicken and egg” issue since so few women are CEOs and they are significantly under-represented on boards. But there really is not a supply issue if you consider the characteristics and skills needed for board positions. Those characteristics are possessed by a great many women who are CEOs of smaller public and private companies; CFOs; General Counsels; retiring audit partners; consulting and law partners; small-medium business owners; nonprofit, academic, and public sector executives; risk management, compliance, and governance officers; and investment bankers, money managers, and other senior C-suite members.
At our organization, the Committee for Economic Development, we’ve developed an ambitious yet straightforward approach to the challenge at hand: we have initiated an effort to encourage corporations to replace every other retiring board director with a woman. We’re not asking for term limits, or for boards to add the expense of incremental positions, or for early retirement of male directors, although if companies took any of these actions it would accelerate the process. We’re just saying: replace every other director, as he or she retires, with a woman. Hence we have entitled our initiative “Every Other One.” If corporations adopt this model, women will occupy nearly a third of Fortune 1000 board seats in just a few years and over time will reach parity in the boardroom.
As we head into 2016, resolving to put this issue at the top of the to-do list will represent a major step forward for the country. U.S. companies will add a competitive edge and, at the same time, the potential of countless female leaders will be realized.
Commentary by Steve Odland, CEO of the Committee for Economic Development and former CEO of Office Depot and AutoZone.
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