For the first time in eight years, the percent of women on U.S. corporate boards declined last year.
Despite more evidence about the benefits of the increasing the number women on boards (such as better decision making), and mounting pressure from groups like State Street Global Advisers and Blackrock to do so, the data suggest it will take until the end of 2055 to have board parity in the U.S. if we continue at the current rate.
This is where CEOs can help. Board appointments are highly influenced by CEOs, and they can do a better job of advocating for getting more women on the board. Fortunately, some are leading the way.
We interviewed CEOs who successfully reached board parity to learn how they did it. We recruited our sample from the 36 companies in the S&P500 that have at least 40% women board directors. We interviewed 15 CEOs and one board member who served as the “nomination and governance chair” from these companies. The companies in the sample had an average of 49.8% women on their boards.
We asked these “Champions” three simple questions: what are the benefits of board gender parity, why don’t other CEOs take these steps, and how did you do it? We also surveyed 20 of their board members about their reactions to serving on a more gender diverse board. In addition to these leaders, I spoke with six CEOs, along with one “nomination and governance chair,” from companies in the S&P 500 with boards made of 20% female directors, to compare how their perspectives were different.
The Champions said that in their experience, most CEOs and board members fail to take the actions needed to increase gender diversity because of fear of change or risk of failure. This reminded us of the psychological concept of “regulatory focus,” which suggests people pursue goals in one of two ways: people with a strong “promotion” focus are motivated by what they have to gain, while people with a strong “prevention” focus are motivated to protect what they might lose. Our interviews suggest that Champions conveyed a strong “promotion focus,” and were motivated by their aspirations and desire for improvement; whereas CEOs who do not push for diversity on the board may reflect a “prevention focus.”
Fear of increasing board diversity makes sense when you consider research showing that demographically diverse boards are more likely to challenge the CEO; and that board members who are demographically similar to the CEO feel less comfortable sharing dissenting opinions toward the person who helped them gain their coveted seat. Indeed, a McKinsey survey of 692 directors and C-suite executives in 2014 showed that only 14% of them chose “a reputation for independent thinking” as a main criteria for appointing new directors, which suggests that many CEOs may not want dissenting opinions in the boardroom.
The interviewees also described how CEOs may fear appointing directors whom they don’t know personally. Many described concerns about disrupting good relationships among board members by bringing in someone new or different.
This desire to appoint “known” or familiar board directors is reflected in the strong and consistent data showing that most new board members are recruited from the existing networks of current board members — networks that are likely composed of others of similar race, sex, socio-demographic, behavioral, and interpersonal characteristics.
The CEOs also said that a major impediment to gender parity on the board is the focus on electing C-suite-level board directors. According to a 2015 Spencer Stuart Study, boards strongly prefer to recruit active CEOs or COOs to join their ranks, with 65% of respondents expressing this preference. This makes it much easier to appoint male board members, since only 6% of U.S. CEOs are women and the results are similar for the rest of C-suite. The CEOs noted that recruiting firms also likely yield white male board candidates unless the CEOs insist otherwise.
But the CEOs I interviewed reported that C-suite experience should not be a prerequisite for board directors. Although having 1-2 board members with C-suite experience was seen as a plus, the CEOs noted that having all CEOs on the board would also represent a lack of diversity of thought.
Another obstacle to increasing diversity on boards, according to the CEOs we interviewed, was an over-reliance on the idea that boards must select “the best person for the job.” Baked into this assumption seemed to be the idea that recruiting women would mean lowering their standards. This is consistent with some research; for example, one study found that when organizations promote a culture that they define as a meritocracy, there is actually greater bias against women. It seems that the notion of meritocracy has become synonymous with maintaining the status quo. But, as the interviewees noted, boards are certainly not selecting the best person for the job if they are only recruiting from their small, existing networks.
Two of the CEOs from the 20% group also reported worrying that others would think the women chosen for their board were selected on the basis of their gender. One said, “I’ve always been a little reluctant [to talk about women on the board] because I don’t want our board members to be known for their gender or diversity. I want them to be known for their skills. Our members weren’t appointed because of their gender.”
Indeed, when women believe they are the beneficiaries of affirmative action it can hurt their self-esteem, making them think they are less competent than they would otherwise feel. Psychologist Claude Steele calls this “stereotype threat” – people are aware of stereotypes and therefore fear confirming them.
But the truth is that having more women on the board is no risk. Nothing bad will happen, but some good things will happen: the individuals I interviewed all mentioned reduced groupthink, better listening, and more enjoyable interactions as a result of having more women on the board. These benefits have been borne out in research as well. Having more women board members can also create role models for talented women, result in promoting more women executives the subsequent year, and better financial performance.
The Champions I talked to revealed that change is intentional, and other CEOs can do a number of things to move their boards toward gender parity.
First, take a promotion focus when it comes to diversity. Think about all of the benefits that a diversity of perspectives and experience could bring to the directors’ table, rather than about the potential costs or risks. Emphasize this view to the board as well. And be proactive in extending your personal networks to include more women and minorities.
Second, look for major disruptions in the corporate board (e.g., mergers, going public, etc.) as an opportunity to increase women. Many of the Champions talked about using these board disruptions as opportunities to make changes in the composition of their boards rather than maintaining the status quo and appointing more white men. In the absence of major disruptions, CEOs might encourage annual reviews of board members as a way of removing stale board members and bringing in new perspectives.
Whether gathering candidates from search firms or your own networks, be sure that you have at least two women on the finalist slate. When there is only one woman, she’s likely to be viewed as a token, which can amplify status quo bias and undercut her chance of being selected. When there are two women in the running, our research shows the status quo bias seems to break down.
Some of the CEOs I talked to said this may not be enough; some went as far as to say that they would interview all of the women finalists before interviewing any of the men for an open board seat. They said that the status quo bias is so strong they said that if a man were interviewed first, the board would prefer to hire him over any of the women. Indeed, there are data showing that male board directors tend to be replaced with men.
Finally, it’s worth noting that getting the first woman on the board is often the most difficult step; women may be reluctant to join an all-male board because they might fear how well they would be treated. But one women on the board opens new networks and could bring greater diversity to the board over time. These steps can help all CEOs become Champions.
By Stefanie K. Johnson and Kimberly Davis
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