The Answer to the Boardroom Diversity Problem By: Mark Rogers
“16.1 percent,” the percentage of women directors for Fortune 500 companies, has served as a rallying cry for corporate governance and diversity experts across the country. This is an astonishing figure when you consider the economic force of women in the United States. According to a recent report from the Women’s Leadership Foundation, women now control more than 80 percent of all household purchases and 27 percent of the world’s wealth (about $20.2 trillion). Furthermore, the Federal Reserve Board reports that women in the United States control 60 percent of spending and investments worldwide, making them the largest economic force in the world. So why is it that women make up such a small number of corporate directors?
An event sponsored by the Corporate Board Initiative of The Women’s Forum of New Yorksought to answer this very question. In a room filled with corporate governance and boardroom diversity experts from across the world, there was no shortage of proposed answers. One panel member suggested that the answer is rooted in psychology –that most individuals want to be surrounded by people who are like them – thus, it shouldn’t be a surprise that white male corporate board members look for white males.
I thoroughly believe that diversity in the boardroom is a fundamental element to an organization’s success, but I look at the term “diversity” in the boardroom as a “diversity of perspective” – meaning what is needed is diversity of skill sets, expertise, and background. The goal should be to get to a point where boards are searching for the best director candidate possible – regardless of gender.
The solution is getting the shareholders to understand the correlation between gender diversity in the boardroom and corporate performance. The most recent study from the Credit Suisse Research Institute demonstrates that companies worldwide with at least a $10 billion market capitalization, which have women on their board, outperformed similar businesses with all-male boards by 26 percent over a period of six years. Furthermore, according to a study from Catalyst, Fortune 500 companies with the most women directors on their boards, had a 42 percent greater return on sales and a 53 percent higher return on equity than their counterparts in the Fortune 500.
The more these studies are put in front of shareholders, the less likely they will be to ignore their significance and remain on the sidelines of this important issue.