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How Long Until Gender Parity is Reached the Boardroom?

By Melissa J. Anderson

How long will it take before gender parity is achieved on corporate boards? According to a new interactive tool created by The Conference Board and Georgetown University’s McDonough School of Business in partnership with The SAIS Center for Transatlantic Relations at Johns Hopkins University, it will be decades before there is an equal number of men and women on corporate boards.

“Board diversity is becoming a greater concern,” said Jonathan Spector, CEO of The Conference Board. “There are many factors that determine how quickly gender diversity can be increased. Our model was built to help companies identify those factors and gauge their impact on the future make up of their boards.”

Spector added that the tool provides critical analysis of the issue around board diversity, and anticipate the outcome of work done to improve it. And given the impact of board diversity on corporate governance, it may be time for companies to pay attention.

Diversity and Governance

Last month, Deloitte’s Global Center for Corporate Governance released its second annual edition of “Women in the boardroom: A global perspective.” It says:

“From a corporate governance perspective, including more individuals with different backgrounds on boards of directors could improve these boards’ functioning; harnessing strength from a variety of backgrounds, experiences, and perspectives allows boards to bring a more diverse perspective to problems. Gender is one factor in this context…”

The report discusses the issue of quotas and regulations around boardroom gender diversity in different countries around the world, and seeks to show the value of working toward gender parity.

Dan Konigsburg, Managing Director, Deloitte Global Center for Corporate Governance explained, “The ongoing work of Deloitte member firms’ Centers of Corporate Governance around the world provides plenty of anecdotal evidence that more diverse boards are the more effective boards.”

The report also pointed out that plenty of quantitative research suggests a correlation between financial results and gender diversity in the boardroom, as well as improvements in governance.

Maggie Wilderotter, Chairman and CEO of Frontier Communications Corporation wrote in the report that implementing a critical mass of female leaders (usually considered three or more) in the boardroom can create better companies. She said, “the need for critical mass in areas traditionally underrepresented – boardrooms, the C-Suite – even the Supreme Court of the United States – is vital if we expect to see systemic improvements.”

Liselott Kilaas, Managing Director of Aleris AS in Norway and Denmar, agrees – diversity of thought leads to better outcomes. In the Deloitte report, she wrote, “Ultimately, board diversity is about combining alternative and complementary views that in the end, lead to better board decisions. In this context, increasing female board participation is but one of several measures, but certainly an important one.”

More Work Needed

Spector said, “On the boards of Fortune 500 companies, the percentage of women has risen painfully slowly in the last 15 years – from 9.6 percent in 1995 to 15.7 percent in 2010. At current rates of change, it will take not years, but decades, to approach true gender parity.”

For example, The Conference Board said, according to the model:

“If, over the next eight years, 25% of the Fortune 500 board seats that became vacant annually were filled by women, the percentage of female directors in that sample would be approximately 23% in 2020. This outcome is well below the 40 percent expected in those European countries that have recently adopted legislation introducing a gender-diversity quota system for corporate boards.”

The tool shows that current work to improve diversity at the board level is a start, but it’s not enough.

As Wilderotter commented, “We all know that we are well past the time where this should be an issue. It should just be the way things are. It boils down to respect, common sense and good business.”

But considering the slow pace of change, what can be done to move things along more quickly – not just as a matter of fairness in general, but as a matter of good governance on the behalf of shareholders?

Jane Diplock, company director of Singapore Exchange Limited and Australian Financial Services Group Pty Limited, as well as a member of the International Advisory Committee of the CSRC (the Chinese Securities Regulator) and the International Advisory Council of the Center for Financial Regulation, and Ambassador for the International Integrated Reporting Committee, suggests in the Deloitte report that more stringent measures may be needed.

She writes:

“If the current cohort of business leaders continues to put their heads in the sand and ignore the issue, as many have successfully done up to now, some intervention in the interests of shareholders and other stakeholders may well be necessary. The development of targets with a relatively short timeframe underpinned by the implied threat of quotas, or quotas, may be necessary to inspire some business managers to action.”

More dramatic increases of women in the pipeline toward the board is needed to ensure that gender parity is reached in this lifetime.

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