Sector News

Female CEOs Make Room for Female Directors

November 12, 2014
Diversity & Inclusion
During board meeting breaks, female directors of Avon Products Inc. use a women’s room right next to the boardroom. Directors needing the men’s room must trek to the other side of the senior executive floor at its Manhattan headquarters.
Though unintentional, the lavatory layout says plenty about Avon’s board: Women dominate. Led by Chief Executive Sheri McCoy, they occupy seven of the 11 seats.
Avon is unusual but not unique. Many U.S. companies run by women have multiple female directors—a rare bright spot amid the sluggish progress in board gender diversity.
About 54% of the 67 concerns in the Standard & Poor’s 1500 Index with a female CEO now have at least three women in the boardroom. That is a far higher proportion than the 15.5% of such firms led by a man, concludes an analysis for The Wall Street Journal by governance researchers at MSCI Inc. Women comprise 15.8% of S&P 1500 boards, up slightly from 12.5% in 2009, it found.
However, looking at the S&P 1500 boards as a whole, only six of them—or less than 1%, have a majority of women.
The tactics that female leaders use to expand women’s boardroom presence offer a blueprint for other CEOs. Several top women bosses say they play active roles in seeking female directors, insist on women-only slates or consider less conventional candidates. General Motors Co. , DuPont Co. , Hewlett-Packard Co. , International Business Machines Corp. , PepsiCo Inc. and Xerox Corp. are some of the biggest women-led businesses with three or more female directors.
“It’s time to take a chance on women,” says Gracia C. Martore, chief of Gannett Co. , which named a fourth female director in July.
Big companies with three or more female directors achieved significantly better financial results than those with none between 2004 and 2008, according to a 2011 study by Catalyst, a nonprofit research group. Recent German and Australian studies also found positive financial impact from gender-diverse boards.
Compared with many of their male counterparts, “women CEOs are even more passionate about this agenda of getting more women on boards,” and so they take risks on up-and-comers, says Kim Van Der Zon, head of the U.S. board practice for recruiters Egon Zehnder. The search firm has handled numerous hunts for female directors of female-led companies in recent years.
HSN Inc. Chief Executive Mindy Grossman typifies the trend. Three of her nine fellow directors are women—along with roughly 80% of customers of the retailer, known for its home-shopping network.
During a 2012 board search, “I wanted a woman who had digital and media experience,” Ms. Grossman recalls.
The CEO says she deliberately didn’t limit the hunt to female prospects with public-company board experience, which businesses often require. “If you narrow what you’re looking for to such a degree…you’re going to lose an element of diversity,” Ms. Grossman says.
HSN chose Ann Sarnoff, chief operating officer of BBC Worldwide Americas—and a boardroom novice. Her current title is operating chief for BBC Worldwide North America.
It was a similar story for Gannett’s newest female director. The media company tapped Lidia Fonseca, a Quest Diagnostics Inc. executive without prior board service. As a digital expert, “she was the perfect fit,” Ms. Martore says. “Nobody was born on a public-company board.”
Other boards tend to prefer women who have been a CEO or chief financial officer. But “there are a finite number,” Ms. Martore observes. Female executives with that background accounted for 18% of such Fortune 500 directors appointed last year, recruiters Heidrick & Struggles International Inc. report.
Some advocates for women on boards clamor for change faster than companies can adapt. Numerous boards recently shrank in size or increased their retirement age, curbing the need for fresh blood.
Nor does every female chief campaign for board gender diversity. Sally J. Smith, CEO of restaurant chain Buffalo Wild Wings Inc. since 1996, is the only woman on its seven-member board. Turnover rarely happens, due to the board’s small size and mandatory retirement age of 75.
Directors considered women to fill their latest vacancy four years ago, but chose a better qualified man instead, Ms. Smith recalls.
“I definitely want to add a woman to the board,” the Buffalo Wild Wings leader says. “A sitting or recently retired female CEO would be great.”
Corporate chiefs carry tremendous clout during board searches, which independent directors officially manage. For one, they must feel comfortable with the finalist. The CEO and front-runner get along best when they share a personal chemistry and common background—such as gender or industry, board members say.
Consider Helen McCluskey. The former head of Warnaco Group Inc. quickly bonded with Ms. McCoy before Avon selected her this summer as the seventh female director of the global beauty company, according to someone familiar with the matter.
“I have been marketing to women my entire life and I happen to love the category of cosmetics,” Ms. McCluskey told the Avon chief during her interview, this person says.
Women business leaders also find that female faces around the boardroom table can alter formal and informal interactions. Because women hold five of 12 directorships at Frontier Communications Corp. , “we make better decisions,” observes CEO Maggie Wilderotter . “They speak up.’’
For example, female board members urged the regional communications-services concern to bolster customers’ online security because feeling safe “is something that women care about,” Ms. Wilderotter says. Management introduced better security protections.
Patti S. Hart, head of International Game Technology , helped recruit two female directors since taking command of the gaming-equipment business in 2009. She thinks the women built trust among all directors by talking about their personal lives during board dinners. “The board functions better.”
Yet IGT directors sometimes disagree about whether the boardroom feels chilly. The women “are all freezing,” Ms. Hart says. The men usually agree to turn up the heat. But, she says, “it depends on how loud we complain.”
By Joann S. Lublin 

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