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Gender equality, equity and balance: Milepost 2022 

May 21, 2022
Diversity & Inclusion

Equality. Equity. Balance. These terms are widely used but they hold different meanings to different audiences. In this discussion of gender representation in top management, equality can be looked at in terms of equal opportunities for men and women. One simplified example: equal numbers of men and women advance to leadership roles in organizations and they are compensated the same amount for the same work. Equity is different—equity requires mitigation to overcome a legacy of exclusion or underrepresentation. In an organization where, for example, men in leadership outnumber women 10-to-one, equal advancement isn’t going to change that ratio. Equity demands that organizations level-up.

Balance is the goal—where people appear throughout organizations in demographic ratios commensurate with how they appear in the general population. That includes not only proportional representation in senior leadership—it also means proportional representation across roles. If 75% of CHROs are women but only 5% of COOs, that’s not balance. Boards, investors, clients, employees, candidates, the media and regulators are all laser-focused right now on the question of gender balance. AESC talked to several members of the AESC Diversity Leadership Councils to consider gender representation at the tops of organizations, setting a marker for progress so far and mapping the path to parity.

STATE OF GENDER REPRESENTATION AT THE TOP
For all the volume, energy and urgency around diversity, equity and inclusion, women are ascending to the top of organizations slowly. Deloitte’s 2021 Women in the Boardroom global research report found that 19.7% of board seats were held by women, up from 15% in 2016. During the same timeframe women Board chairs rose from 3.8% to 6.7% and women CEOs rose from 4.4% to 5%. That pace of progress is slowing further. For example, according to Catalyst, of the MSCI ACWI index of 2,907 large and mid-cap companies from 23 developed countries and 25 emerging markets, the percentage of women directors rose only .6% from 2019 (20%) to 2020 (20.6%). Consider that in 2020 there were “nearly 13 companies run by a man for every company run by a woman.” Another way to look at the trend is this: worldwide the decline in all-male boards from 2019 to 2020 was only 2 percentage points.

A REGIONAL VIEW OF GENDER EQUALITY
Global figures don’t tell the whole story. Some countries are close to parity and others are well behind. Regulatory and investor pressure in Europe and ESG investing and disclosure requirements in North America have driven improvements at the board level. Latin America is struggling to make progress along with much of the Middle East. APAC is uneven, with relatively high female participation at board and executive levels in Australia and New Zealand, notable improvements in some countries, and very weak progress in others, including the major economies of China, India, Japan and South Korea.

EUROPE:

Women hold 35% of board seats in Europe, but that level of representation is unevenly distributed with some countries achieving substantial representation and others significantly behind. For example, France currently leads the world in female representation in the boardroom at 44.5%, according to Credit Suisse Research Institute, but the European country with the lowest participation rate has only 8.9%. In stark contrast to the percentage of women on boards in Europe, women held only 15% of C-suite positions. And these numbers are not a result of women having an inferior education. Women make up the majority of college graduates but only 37% of managers and 8% of CEOs. To unblock the stalled progress of women’s representation on European boards the European Commission is considering legislation that would require listed companies to fill at least 40% of non-executive board seats with women.

APAC:

Women’s representation in corporate leadership in APAC covers a wide spectrum. A 2019 report by UN Women found that in the region women occupy 20% of managerial positions in the private sector, but only 17% of senior and middle management jobs are held by women. The percentage of women on boards varies widely – from 33.5% in Australia and New Zealand to 11.5% in Japan and 9.1% in South Korea. At the end of 2021 women held 34.2% of ASX 200 boards. LINK

Women in the region know that their gender is a barrier. The 2021 LinkedIn Opportunity Index- APAC shows 41% of women feel they get fewer job opportunities than men and 37% feel they are paid less than men. Robust efforts are underway to improve gender diversity in corporate leadership, from powerful mentoring programs for board-ready women in Malaysia to the revised governance code that will eliminate single-gender boards in the Hong Kong Stock Exchange.

MIDDLE EAST AND NORTH AFRICA:

The labor participation rate for women in the Middle East and North Africa is low, which provides a special challenge for increasing women in corporate leadership. The World Bank coined the term “The MENA Paradox” to describe how increasing female education attainment is associated with low rates of economic participation. In the Middle East and North Africa, women’s labor participation is half that of global rates and social norms tend to limit women to traditionally female roles in health, education and caretaking. According to a 2019 OECD report, “average representation of women on the boards of the largest 142 public companies in MENA remains modest, at 4.8% of total voting board seats.” Even so, efforts are under way to improve gender diversity. For example, Saudi Arabia’s Vision 2030 instituted major reforms resulting in increasing leadership opportunities for women, and the UAE now requires listed companies to have at least one woman board member.

AFRICA:

Africa is home to some of the fastest growing economies and women entrepreneurship is impressive across the continent. In 2019 Africa led the world with 25% female representation on boards and exceeded the global average of women on executive committees with 22%. For example, women occupy 36% of corporate boards in Kenya, and 37% of C-suite roles, as reported by the Kenya Institute of Management. In South Africa, women hold 29% of the board seats and women chair 11% of the country’s top 100 listed companies, according to Bloomberg.

THE AMERICAS:

Credit Suisse reports women hold 35.4% of board seats in Canada and 28.1 in the United States. According to a November 2021 report by the Canadian Securities Administration only 6% of issuers had a female board chair and 5% had a female CEO. LINK Crunchbase reviewed 2020 board data for over 1200 U.S.–based privately held companies and found women help 11% of those board seats. Only 3% of those seats were held by women of color. LINK New U.S. based research indicates female representation rose to 30% on S&P 500 boards overall and 43% of new directors, with 90% of those boards including two or more women directors and zero all-male boards. LINK A comprehensive 2021 report Women CEOs in America by the Women Business Collaborative illuminates women’s progress at the top of companies. At every measure – S&P, FORTUNE 500 and 1,000, Russel 3,000, women run fewer than 10% of companies. McKinsey’s 2021 Women in the Workplace report found that women made up 48% of entry-level positions yet only 27% of Senior VP positions and 24% of C-suite roles. While those numbers are disappointing, it’s worse for women of color whose representation starts at 17% at the entry level and drop precipitously to 4% at the C-suite level.

Latin America is well below the global average with only 12.7% of board seats filled by women. A 2021 study by the Inter-American Development Bank found that women hold 15% of management positions and own 14% of companies in Latin America and the Caribbean. In Latin America traditional culture and deeply rooted gender roles hold many women back, though organizations of women in leadership are working to change perceptions and inspire women to embrace careers in STEM and business, and to rise to leadership positions. Trends in global gender representation at the boardroom level are encouraging, but the numbers may be misleading. The number of board seats occupied by women is not equivalent to the number of women who occupy board seats, as many women sit on multiple boards. The MSCI Women on boards 2019 report found more women (22%) than men (12%) served on three or more boards. The solution is to place more women.

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CONSIDER THE ROLES
Corporate pipelines have a gender problem. Even in organizations where men and women start out at near-equal numbers, men progress faster and climb higher than their female colleagues. Female executives are not distributed evenly across the C-suite. Women are less likely to have roles with profit-and-loss responsibilities, the roles that often serve as stepping-stones to the CEO role, and instead are more highly concentrated in positions such as Chief Human Resources Officer, General Counsel, and Chief Administrative Officer. For more women to rise to CEO the promotion pattern must change, and we need more women striving for positions with P&L, financial and/or operations experience.

A 2020 financial services report from Deloitte Insights found that more opportunities for women may be found in “emerging leadership roles,” meaning roles that didn’t exist years ago—roles such as Chief D&I officer, Chief sustainability officer, or Chief digital officer. Deloitte’s research found that “Across a 10-year average, women accounted for 32.7 percent of emerging roles versus 21.9 percent of traditional C-suite positions.”

HOW COVID-19 IMPACTED WOMEN IN THE WORKPLACE
The COVID-19 pandemic turned a spotlight on women leading their teams through stress and upheaval. Female leaders were more likely to check on the well-being of their teams, help them manage workload and personal challenges and thereby improve retention. In many parts of the world, the pandemic drove women out of their career paths. Some women who were in secondary-breadwinner roles became primary caregivers for children and elders, displacing them from their jobs or driving them to burn-out.

Some companies managed the economic impact of COVID by relegating a large swath of the workforce to part-time status, and for many women that interrupted an already challenging career trajectory. The disruptive impact of COVID affected industries with concentrations of women such as retail, health and hospitality, disproportionately. The long-term impact of the pandemic on women in leadership remains unknown, but McKinsey reports that “one in four senior women has considered stepping out or slowing down in their careers.” Helping women resume their roles, get back on their career paths or carve new ones and provide support so they can return to work will help soften COVID’s impact on the talent pipeline.

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MOVING THE NEEDLE TOWARD GENDER BALANCE
What else will drive leadership teams closer to parity? The actions of government, market forces, public and investor pressure and even individual leaders are making a difference.

TRANSPARENCY:

Transparency can drive change. For example, the UK’s Davies Review and subsequent Hampton-Alexander Review were successful, voluntary business-led efforts to achieve 33% female representation on FTSE 350 boards. The recommended progress reports and disclosures by listed companies drove accountability and ultimately contributed to the success of the campaign. Exchanges including HKEX in Hong Kong, Nasdaq in the US and SEBI India are establishing new standards which require listed companies to meet diversity minimums and/or disclose their board composition. Asset managers such as Blackrock, Vanguard, Fidelity International and AXA IM have indicated they will leverage their voting power to encourage disclosure and demonstrate to boards their diversity expectations. Stakeholders want to know how companies are measuring up when it comes to diversity. For example, the 2021 proxy season saw a major increase in employee DEI related proposals, board diversity proposals received an average 59% vote, and investors asked companies to report data aligned to the disclosure framework of the US Equal Employment Opportunity Commission, which averaged 70% support.

Transparency applies to the inward-looking company, as well. Mercer internal labor market maps provide insights, including rates of hire and promotion, representation by career level, and points where the participation of women drops disproportionately. Companies who collect and examine this data are better positioned to prepare their talent for future roles. For example, if P&L responsibility is a required steppingstone for a CEO, fill the P&L pipeline with women. The trend toward transparency is not going away and increasing transparency will only increase pressure for companies to take a hard look at themselves.

MANDATES:

Several countries have board diversity mandates with varying thresholds and sanctions. Mandates for gender participation on boards were so effective in France, the French Parliament recently voted to require companies with more than 1000 employees to have at least 30% of either gender in company leadership positions by 2027 and 40% by 2030.

Mandates can be controversial, with some experts believing a voluntary, organic diversification is more authentic, and others insisting that diversification requires an accelerant. Mandates have increased women’s representation on corporate boards, and so have concerted, voluntary efforts such at the Davies – Hampton-Alexander Reviews in the UK. Catalyst published some statistics on mandates in the 2021 Women on Corporate Boards: Quick Take: “Nearly three-quarters (71.8%) of MSCI ACWI companies located in jurisdictions with established compulsory quotas had at least 30% women directors in 2019. Among companies without compulsory gender quota requirements, only 20.3% of boards reached the 30% women director threshold, and 23.0% had no women directors.”

MOMENTUM:

Something happens when women gain traction in company leadership. Deloitte’s research identified a multiplier effect. “Adding one woman to the C-suite resulted in three women joining senior management roles.” Even boards tend to be more diverse at companies with women chief executive officers or board chairs. “Companies with women CEOs have significantly more balanced boards than those run by men—33.5% women versus 19.4,” Deloitte’s research states “The statistics are similar for companies with female chairs.” A global survey by Corporate Women Directors International found similar results. Companies with a woman CEO had women on their Boards and women in senior management at significantly higher rates that companies led by a man. The findings held true in each region—North America, Europe, Africa, Asia-Pacific and Latin America—and remarkably, “Following being named CEO, these women-led companies increased their percentage of women board directors from 21.9% at the time of appointment to 34.1% and their percentage of women executive officers from 24% to 36.4%.”

LEADERSHIP:

Members of the AESC Diversity Leadership Councils interviewed insist that the drive for diversity must come from the top—the number one critical success factor is what the CEO says and does. That leadership applies to setting the priority, instilling it through the company, communicating consistently and living it through action. In fact, AESC’s recent client research of 1000 executives from around the world cited that the three top reasons for slow progress in gender equality were Bias, Culture and Leadership – which also means the top three drivers for gender diversification is the same three – with Leadership being essential. CEOs can lead with intention, mend the broken rung that sees women, especially women of color, diverted from the management ranks. CEOs can track the course and compensation of women and minorities and hold managers and themselves accountable for the outcome.

ONE MORE THING
Companies seeking to add diversity to their leadership teams often benefit from expert counsel. The current talent market is intense, and AESC member search consultants advance female and diverse talent by helping clients do things differently. For example: Identifying the need rather than just filling a seat. Search consultants help clients see things from a new angle—qualities and competencies for the future, rather than credentials from the past; criteria that won’t inadvertently eliminate candidates with less traditional backgrounds. Search firms are also experienced in ensuring culture alignment and culture add, and even helping clients build an inclusive environment where everyone thrives; a place where everyone wants to work. The unprecedented demand for representation at the top of organizations is a global call to action that all stakeholders including the executive search and leadership consulting profession can answer together.

By AESC

Source: aesc.org

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