Why Warren Buffett Won't Get More Women on Boards

Buffett Photograph by Daniel Acker/Bloomberg

Berkshire Hathaway shareholders take heart: With Warren Buffett officially adding a third woman to his 13-person board at the annual shareholders meeting on May 4, the company’s choppy performance of recent years could improve. Studies show that three is the magic number at which women cease to be an oddity in the boardroom and change the dynamics in a way that leads to better governance and better results.

One of those studies came out in 2010 from recruiter Heidrick & Struggles and WomenCorporateDirectors (WCD), a network of more than 2,000 women serving on boards worldwide. Their members were probably pleased to see a piece by Buffett in this week’s Fortune that called on “fellow males” to better deploy the talents of women. While the Sage of Omaha was lamenting the “gender-related self-doubt” that nagged at such friends as the late Katharine Graham, some 250 women directors were in New York to network and share best practices at WCD’s third annual global institute.

Meanwhile, on May 1, GMI Ratings issued its annual report on women on boards that suggests all these studies and feel-good missives haven’t done much. Its survey of 5,977 companies in 45 countries found that quotas and legislative pressure have helped Europe post double-digit gains in women directors over the past decade. In the U.S. , a country that Buffett says “unleashes human potential to an extraordinary degree,” the numbers have budged by a few percentage points. As of the first quarter, the proportion of female directors ranged from 11.3 percent at S&P small cap companies to 16.9 percent at the S&P 500.

To understand the problem,  go back to Buffett. The world’s richest investor speaks the truth in echoing the views of Facebook Chief Operating Officer Sheryl Sandberg by noting that “too many women continue to impose limitations on themselves.” But that pales next to the limitations that leaders such as Buffett unwittingly impose. A Calvert Investments report in March ranked Berkshire Hathaway last among the S&P 100 in advancing women and minorities—a record that Buffett, 82, fails to mention in his op-ed piece (PDF).

The issue isn’t that Buffett is sexist; it’s that he’s a creature of comfort. This is a man whose stucco house, love of Cherry Coke, investment strategy, and choice of friends has been stable for more than half a century. When teaming up with Brazil’s 3G Capital to buy Heinz, Buffett explained that he’d known chief Jorge Paulo Lemann for years. Whether he’s talking shop with investor Charlie Munger, 89, or giving an interview to Fortune writer Carol Loomis, 83, Warren Buffett is a man who values trust and loyalty.  That’s great, except when it comes to diversifying your board.

An independent director isn’t supposed to be someone you’ve known for years; part of the job is to hold you accountable to the other owners of the company.

When it comes to being head of a public company, Buffett has held fast to his own rules—whether it’s his quixotic succession process, his allergy to dividends and stock splits, or his personal backing of companies like General Electric and Goldman Sachs Sachs during the financial crisis. It’s a strategy that has made Buffett both revered and rich. But that, mixed with cheerful calls to fellow males, is hardly a recipe for shaking up the boardroom.

One solution lies in the approach taken by WCD and others who aren’t populating the current ranks of chief executive officers. Co-founder Susan Stautberg launched the group in part because of the fierce resistance she had faced in getting a UN group to accept the accomplished multilingual head of a global law firm into an advisory role. That person was Christine Lagarde, the former French finance minister who’s now running the International Monetary Fund. Lagarde didn’t fit the traditional mold. Many accomplished women don’t. That doesn’t mean they aren’t as capable, or even better suited, to be the guardians of shareholder interests than a retired CEO who is chummy with the other guys around the table. What WCD does, Stautberg says, is help its members form relationships and develop strategies for their own success while helping boards see candidates “who are not just the same old names.”

It’s what USA Network founder Kay Koplovitz has done with Springboard Enterprises, developing and funding a global network of women-run businesses that’s vastly outperformed its peers. Or what Morgan Stanley’s Eve Ellis hopes to do with the Parity Portfolio, which will invest in companies that have three or more women on their boards. Or what Pennsylvania State Treasurer Rob McCord and several of his peers are doing in favoring such companies when investing pension funds.

They’re not waiting for Warren Buffett and fellow males to get on board. They don’t see America as a place that’s only using, as Buffett puts it, “50 percent of our human capacity.” With women already making up almost half the labor force and dominating many professional programs, they know there are plenty of women working at full capacity in the executive ranks worldwide. There are plenty of women who, like Buffett’s daughter, suffer less from a lack of self-esteem than a lack of opportunity. By betting on the companies, boards, and investors that are determined to do something about it, they’re following Buffett’s reputation for picking undervalued assets—and then watching them outperform.

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