Maybe the men who dominate U.S. boardrooms could use those “binders full of women” Mitt Romney says he asked for a decade ago to seed his gubernatorial cabinet in Massachusetts. About 21 percent of new members named to the boards of companies on the Standard & Poor’s 500-stock index last year were female, a decline of 9 percent over the past five years, according to executive recruiter Spencer Stuart. And women represent just 16 percent of all directors at companies in the index, barely above the 15 percent level of 2006, Spencer Stuart says.
There’s nearly as wide a gender gap when it comes to diagnosing the roots of the problem. A solid 45 percent of male directors say the reason that the number of women around the table has barely budged is a lack of qualified candidates. Only 18 percent of female board members agree, according to a survey released last month by recruiter Heidrick & Struggles, Harvard University, and the WomenCorporateDirectors organization.
“There still is resistance in the heads of some people who like it the way it is,” says Barbara Hackman Franklin, a director at Aetna who also led the first White House effort to recruit women for high-level jobs as a staff assistant in 1971 to President Richard Nixon. Board members tend to consider their friends, who are often male, when openings occur, says Franklin, a former U.S. Secretary of Commerce under George H.W. Bush and chairman of the National Association of Corporate Directors, which last month released a report warning that progress toward boardroom diversity is stalling.
Frustration over the slow gains pushed 51 percent of the women directors surveyed by Heidrick & Struggles to say they support mandates such as the gender quotas and corporate governance codes that have been approved in at least 10 European nations, including France, Norway, and Spain. Other directors, including Anne Mulcahy, the former Xerox chief executive officer and a director at Johnson & Johnson, Target, and Washington Post, argue that term limits are needed for directors to free up space for women. Last year among Fortune 500 companies, only 336 board seats changed hands out of 5,300 positions, says Heidrick recruiter Bonnie Gwin. With term limits, Mulcahy said last month at a conference hosted by the Women’s Forum, “your pool would inevitably be more diverse.”
The percentage of women on boards of S&P 1500 companies barely budged from 12.1 percent in 2009 to 12.6 percent today, according to a survey released in March by GMI Ratings, a corporate governance adviser to big investors. The U.S. is 11th among industrialized nations, trailing countries such as Norway (36 percent), Sweden (26 percent), and France (17 percent), GMI found. “This is just moving at a glacial pace in the U.S.,” says Paul Hodgson, chief research analyst at GMI, which is trying to boost the number of female board members.
Only 25 percent of male directors support quotas to change the disparity, according to the 2012 Board of Directors Survey by Heidrick, Harvard, and WomenCorporateDirectors. The survey’s authors say many women blame the fact that, in business, “traditional networks tend to be male-oriented.” Rather than a talent issue, “it’s more the system,” explains Catherine Allen, who sits on three boards and the governance committees at one of the companies, Synovus Financial. “For those boards that have a token woman or no women on the board, they may look only within their own friends. Part of it is being a little more creative.”
It’s a different story where women hold the reins. The 15 S&P 500 companies led by female CEOs last year had about 33 percent women directors vs. the 16 percent average for companies in the group led by male CEOs, Spencer Stuart says. “Diversity is not rocket science,” says Cari Dominguez, a director at Manpower Group and a former chair of the U.S. Equal Employment Opportunity Commission under George W. Bush. “If you look around and everyone looks like you, and it doesn’t reflect broader society, you have a problem.”
Pension funds have taken the lead in pushing board diversity. The California State Teachers’ Retirement System helped pressure Facebook to add Chief Operating Officer Sheryl Sandberg to its all-male board in June. CalSTRS and the California Public Employees’ Retirement System, which combined manage about $401 billion in funds, have worked with GMI to create their own binder of sorts, called the Diverse Director DataSource, where aspirants can create a profile in a central database companies can use in director searches. There are 400 candidates so far.
Norway led European nations in 2003 in legislating that at least 40 percent of corporate board seats be filled by women. Spain followed in 2007 with a law requiring 40 percent female representation on large company boards by 2015, Iceland’s 40 percent quota kicks in next year, and France will impose the same minimum for big companies by 2017. Yet some researchers say Norway’s experience casts doubt on the efficacy of such mandates. “The quota led to younger and less experienced boards, increases in leverage and acquisitions, and deterioration in operating performances, consistent with less capable boards,” found a 2011 study by researchers at the University of Southern California’s Marshall School of Business and the University of Michigan’s Stephen M. Ross School of Business.
“Our study shows there is a cost to business from the quota,” says Amy Dittmar, the University of Michigan co-author of the study. “It’s not that women are destroying the value of these firms, it’s more a factor of the lack of experience we measured.”
Although governance advocates say U.S. companies have enough experienced female managers to avoid similar outcomes, fully 16 percent of Fortune 1000 companies have no female directors, alongside another 32 percent that have only one, according to 2020 Women on Boards, a group pushing for 20 percent of directors to be women by 2020. About a third of boards meet that requirement now. “I don’t think it’s a conspiracy to not have women,” says Nancye Green, a director at Hallmark Cards who doesn’t support mandates. “I do believe it’s what’s familiar and that’s changing. We may have to force the issue to make it happen faster.”