There’s no doubt that American women wield impressive purchasing power and have taken great strides in business and financial sectors. Just yesterday, Yahoo (NASDAQ:YHOO) named former Google (NASDAQ:GOOG) executive Marissa Mayer as its CEO and also appointed her to the board of directors.
In the U.S., females make about 75% of all buying decisions, own 40% of privately owned businesses, hold 51% of the country’s private wealth, account for 50% of all U.S. stock ownership and constitute nearly 60% of college grads.
It’s also been estimated that in the U.S., women control about $7 trillion in consumer and business spending. To add a dose of perspective to that figure, Japan’s entire economy is about $5.5 trillion.
Such staggering stats add to the shock factor regarding the next set of numbers: Women held only about 16.1% of board seats on Fortune 500 companies in 2011, according to a Catalyst study. The same report concluded that less than one-fifth of companies had 25% or more women board directors, and approximately one in 10 had no women at all on their boards. Clearly, Yahoo’s high-profile move with Mayer on Monday is the still the exception.
Research also shows that the U.S. trails Europe regarding female representation on large corporate boards. Although most European boards are predominately male, some countries have begun taking aggressive measures. The U.K.’s 30% Club is a prominent example.
The 30% Club was founded in 2010 by Helena Morrissey, CEO of Newton Investment Management, with the objective of bringing more women onto U.K. corporate boards. The group’s goal is to have 30% female representation on the boards of each of the 100 largest companies in the FTSE Index. To reach its goal, 145 more females need to be appointed to FTSE 100 boards. A few weeks ago, the 30% Club celebrated obtaining the support of more than 50 chairmen.
The possibility of established quotas — an initiative led by European Commission Vice President Viviane Reding could pass later this year — has acted as a spark for European companies to proactively seek more women to fill board positions. “No one wants to wait for regulations to do the right thing,” Jan Babiak, who serves on the finance and audit committees of Walgreen‘s (NYSE:WAG) board, said in an interview with InvestorPlace. Babiak also chairs the audit committee for Logica, a FTSE 250 company headquartered in the U.K.
“Companies want to make decisions on their own terms,” Babiak said, “so the threat of a government mandates could help bring more qualified women to U.S. corporate board rooms.”
Babiak, who holds dual U.S. and EU/U.K. citizenship, believes that Reding’s initiative — along with an influential study conducted by Lord Davies of Abersoch that examined the benefits more diverse boards bring to companies — helped spur many U.K. chairmen to support organizations like the 30% Club.
Having greater female representation on more of the boards of America’s most influential companies is about more than numbers. It’s about more than doing what looks good through the lens of political correctness. It’s about doing the right thing. And not just about what’s right in the terms of gender equality, but what’s right in terms of a company’s bottom line.
Research shows that companies with more female board members perform better financially than companies led by less diverse boards. For Babiak, that logic is common sense.
“It’s human nature for people to gravitate toward others who are like them, and there is something to be said for the old saying ‘great minds think alike.’ But if you put together a group of 10 people who think alike, you’re going to end up with nine redundancies,” Babiak said.
Patricia Russo, the lead director for General Motors (NYSE:GM), is chairman of the carmaker’s compensation and benefits committee. She’s also a member of Alcoa‘s (NYSE:AA) governance and nominating committee, and its executive committee. Additionally she serves on the boards of Hewlett-Packard (NYSE:HPQ), KKR (NYSE:KKR) and Merck (NYSE:MRK). Russo stresses the importance of including more diversity, including gender diversity, in large public companies.
“Companies are dealing with tough, complex issues these days in an increasingly global, increasingly competitive environment,” Russo said in an interview with InvestorPlace. “Having people around the table with different experiences, who have different questions, enables a more robust, enriched perspective. And when you have that, you are better able to make good decisions.”
“It’s a Demand Issue”
Even years after women started entering the workforce in pursuit of high-powered corporate positions, many companies held fast to the archaic notion that there simply aren’t enough qualified female execs who can handle a position on a board of a massive traded public company. Babiak says that line of thinking is simply inaccurate.
“It’s not a supply issue,” said Babiak, “it’s a demand issue.”
Paula Lovell, past chairman of the Federal Reserve Bank of Atlanta and the founder and CEO of national public relations firm Lovell Communications, agrees with Babiak. As a long-time champion of diversity in the boardroom, Lovell is passionate about connecting large corporations with professional women who are more than qualified to hold board positions.
Lovell’s involvement in the movement increased in the early ’90s after a conversation she had with a prominent Nashville businessman during which she encouraged him to appoint at least one woman to his board. His response hurled Lovell into action.
“He said that he would love to have a woman on his board, but that he just could not find one who was qualified,” Lovell said in an interview with InvestorPlace. “I told him he was wrong and that I would send him a list of 100 women who would be qualified to sit on the board of his company.”
Lovell made good on her promise and started an organization called “100 Wonderful Women.” She quickly came up with the names of close to 70 qualified women in the Nashville area alone who she referred to as corporate “rock stars.” Through a network of other professionals, the list continued to grow. By the time the businessman retired, three women were serving on his company’s board.
Although the 100 Wonderful Women group no longer exists, Lovell continues to help companies and recruiters find qualified female board members through her involvement with Woman Corporate Directors. WCD is an international community of women who serve on boards. On average, each member of WCD serves on three to four major corporate and/or nonprofit boards, and 85% of women in WCD are directors of public or large private corporate boards.
While the fact that women hold only about 16% of board seats at America’s largest companies is sobering in many respects, Betsy Cohen, CEO of The Bancorp (NASDAQ:TBBK) and its subsidiary The Bancorp Bank, as well as an active member of Aetna‘s (NYSE:AET) board, says the dynamics within boards regarding women have changed for the positive since she served on her first board 39 years ago.
“When I first started to sit on public boards, I would say something and there would be dead silence,” Cohen said in an interview with InvestorPlace. “Then, the man next to me would say the same thing, and everyone would say, ‘Bob, what a great idea.’ That doesn’t really happen today. Today, there are many more opportunities for women to exercise their professional positions.”
Cohen is hopeful that even more change is around the bend. She particularly encourages companies to take an active role in mentoring young professional women.
“People cannot always define their goals without seeing someone who has gone ahead of them,” Cohen continued. “By and large, people are following the paths that they can envision because they’ve seen it.”
When it comes to future progress, Russo echos Cohen’s sentiments.
“The best approach to initiate change really begins at the top down. It takes a real commitment to the importance of diversity and inclusion — not just at the board level, but throughout the organization.” Russo points to Alcoa as a “great example” of a company that prioritizes diversity through a plethora of internal programs.
She also offered advice to Fortune 500 companies that don’t yet have women board members but want to change that when a position opens: “There are many qualified women available to serve in leadership positions on public boards. Companies that are really serious about wanting to add diversity to their boards should talk with search firms and specifically request that they only bring them candidates who are women.”
Companies cannot expect to perform at levels required for growth and financial sustainability without adding diversity — gender, experience, culture, etc. — to their executive suites and boards. Shareholders should demand nothing less.