J&J’s Mulcahy Says Term Limits May Add Women to Boards
Anne Mulcahy, the former Xerox Corp. (XRX) chairman and chief executive officer and a director at Johnson & Johnson (JNJ), Target Corp. (TGT) and Washington Post Co. (WPO), said limiting the terms of company directors would help seat more women on U.S. boards.
The portion of female corporate directors has been stuck at about 16 percent in the U.S., in part because board members can hold their positions for decades, Mulcahy said at a conference sponsored by the Women’s Forum Inc. of New York yesterday. That leaves little opportunity for new blood, she said.
With term limits, “your pool would inevitably be more diverse,” Mulcahy said. “That’s a very obvious reason this isn’t working,” she said, referring to slow progress in U.S. corporate efforts to narrow the gender gap.
The number of women in boardrooms has increased worldwide since the end of 2005 as countries instituted quotas and companies including Facebook Inc. (FB) added female directors after drawing criticism for a lack of gender diversity. Still, the U.S. lags countries including Sweden and Norway. The latter started a mandate in 2003 and has reached its 40 percent quota.
Helena Morrissey, CEO of Newton Investment Management in London, started the 30 Percent Club in the U.K. to press companies to employ that many female directors by 2015, up from 12 percent in 2010. Morrissey, who spoke to the crowd of about 200 women and men at the conference, said 55 percent of new board appointments in the last six months in the U.K. were women. That compares with about 13 percent in 2010.
Two terms of three years are typical for U.K. board members, she said. ‘It’s more of a job for life in the U.S.’’
Among other panelists were Dina Dublon, a former chief financial officer of JPMorgan Chase & Co. (JPM) who is now on the boards of Microsoft Corp. (MSFT), Accenture Plc (ACN) and PepsiCo Inc. (PEP), and Shelly Lazarus, the former head of Ogilvy & Mather and a director at General Electric Co. (GE) and Merck & Co. (MRK)
The Women’s Forum asks executive search firms and board- nominating committees to sponsor women and enroll them on its database which companies can use to consider potential board candidates.
Some investors are directly asking companies to add women to their boards. Anne Sheehan, director of corporate governance at the California State Teachers’ Retirement System said she wrote a letter to Facebook urging it to add a woman to their board. In June, the world’s largest social networking service appointed Chief Operating Officer Sheryl Sandberg as its first female director.
Still, Ed Kangas, the former CEO of Deloitte Touche Tohmatsu who said he’s been on at least 10 boards, has “never heard an investor even whisper about diversity ever,” he said at the event.
Women made up 16.1 percent of U.S. directors according to a report this year by Catalyst, a nonprofit group that aims to expand women’s business opportunity. That compares with 27.3 percent in Sweden, 24.5 percent in Finland and less than 1 percent in Japan, according to Catalyst.
Women often aren’t considered for boards unless they have prior board experience, Dublon said. Executives should focus first on moving women into positions running business units, she said.
“Boards are the tail of one’s professional career,” Dublon said. “We’re trying to force the increase without having more people in executive management.”
In Europe, some 13.7 percent of board seats in the European Union are occupied by women, after a 1.9 percentage point increase between October 2010 and January, the EU said in March. EU justice chief Viviane Reding is seeking to increase female board members to 30 percent by 2015 and 40 percent by 2020.
Spain has a target for 40 percent of female representation on large company boards by 2015, and France passed a law last year to impose a 20 percent quota by 2014 and 40 percent by 2017 for companies with at least 500 employees and annual sales of 50 million euros ($65 million).
Shares of companies with a market capitalization of more than $10 billion and with women board members outperformed comparable businesses with all-male boards by 26 percent worldwide over a period of six years, according to a report by the Credit Suisse Research Institute in August. The institute was created in 2008 to analyze trends expected to affect global markets.
Companies with women on their boards also performed better in challenging markets than those with all-male boards, according to the study, suggesting that mixing genders may temper risky investment moves and increase return on equity.
The research, which includes data from 2,360 companies, shows a greater correlation between stock performance and the presence of women on the board after the financial crisis started four years ago. Globally, female board representation increased to 59 percent last year from 41 percent at the end of 2005, according to the report.
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