Graduate Management News

The Alsop Perspective: Getting More Women on Boards

By Ron Alsop

IBM Corp., which is celebrating its 100th birthday this year, set a new milestone last month by naming its first female chief executive. Virginia Rometty, currently a senior vice president, also will join the company’s 12-member board, increasing the number of women directors to three.

While three may not sound very balanced, female board representation of 25 percent is more impressive than the dismal 15.7 percent of Fortune 500 board seats overall that are held by women. Clearly, progress in increasing the ranks of women directors continues to be glacial. Never mind a growing body of research showing that they can significantly enhance the quality of corporate governance by challenging the status quo, spending more time on strategic issues, and reducing the level of conflict in board decision making.

 Gender imbalance has prompted some European countries to take the drastic step of setting quotas for the number of women on corporate boards—or at least threatening to do so. But quotas aren’t what most women leaders want or what most academics recommend. “Quotas are a pretty draconian approach,” says David Larcker, an accounting professor and director of the Corporate Governance Research Program at Stanford University’s Graduate School of Business. “You kind of want it to evolve more naturally by matching qualified women to open board seats. Across the Stanford campus, we have a set of highly successful women who could be strong board candidates.”

Business Schools Take Up the Cause

Stanford, along with a few other universities, is doing its part to promote such women and create more gender diversity on corporate boards. The schools are offering special educational programs, conducting research studies, and building databases of promising female candidates.
Larcker is helping drive the Stanford Women on Boards Initiative, along with Heidi Roizen, a Stanford MBA graduate who teaches entrepreneurship in the management science and engineering department. The initiative is tapping interested women in medicine, law, business, engineering and arts and sciences. “This is definitely not tokenism,” Roizen says. “We’re all very sensitive to that. Instead, this is about the recognition that although diversity on boards is good business, there’s more gender balance among employees and customers than on the boards of many companies.”

As Roizen sees it, the board search process is flawed for several reasons. Board members often nominate people they know, meaning they tend to be similar to themselves. What’s more, she says, “the central casting view of a board member is a retired or sitting CEO or another member of the C-suite.” That tends to eliminate many worthy women who may have made their mark in operational jobs but haven’t advanced to senior management roles.

Stanford is building a database of women—about 200 so far—who have served on boards or are highly qualified to become a director.  “We are making it known that anyone doing a board search can access our collection of women’s names and resumes,” Roizen says. “We will be happy to talk to them.”  

Getting the Knowledge─and Getting Known

The Kellogg School of Management at Northwestern University, which also offers companies a database of female director candidates, can take credit for one of the earliest academic programs promoting gender diversity. Its three-day Women’s Director Development Program, which began in 2001, focuses on characteristics of highly effective board members, strategies for making the best decisions as a director, and ways to get on the radar screens of nominating committees.

To date, the program has attracted about 700 women who also have become part of the database of director candidates. About a third of those women currently serve on a public or private corporate board, according to Catherine Taylor, manager of the Kellogg Center for Executive Women.

“Our program is a unique coupling of an academic experience and a database,” says Victoria Medvec, professor of management and organizations and the executive director of the executive women’s center. “We help women evaluate board opportunities to make sure they are selecting the right board for them, as well as leverage their skills for the boardroom. I would argue that many women have the same experience as men sitting on boards but are overlooked.”

Some women participate in the Kellogg program even if they’re already a director. Mary Lee Schneider, for example, enrolled in the Women’s Director Development Program in 2003, after Enron, Tyco, and other financial scandals raised questions about corporate governance. As a director of privately owned Follett Corp. in Chicago, she says, “It was important to get up to speed quickly on the Sarbanes-Oxley Act, to understand what if any impact it might have on Follett.”  In the post-Enron era, she adds, “I wanted to make sure that I was clear on my responsibilities as a director.”

Schneider, who is president of digital solutions and chief technology officer at R.R. Donnelley & Sons Co., especially remembers Medvec’s class in which she learned “when to ask for more information and what type of information, and when to challenge a management team’s analysis of key data.” After being placed in Kellogg’s database, she joined the board of directors of privately held Intermatic Corp. and the board of advisers of Shure Corp.

The University of North Carolina School of Law also has built a database of potential women and minority directors. It offers a one-day annual program, modeled after Kellogg’s, that helps groom both women and minorities for board service. “We talk about nonprofit boards as a starting point and what people need to do in their careers to position themselves for a corporate board,” says Lissa Broome, professor of banking law. The law school initially set out to help North Carolina banks diversify their boards, then expanded its program to other companies.

Gender Diversity Leads to Better Governance

Research from business schools and other organizations consistently shows that gender diversity makes for better governance and leads to more women in upper management. David Matsa, assistant professor of finance at the Kellogg School, found in his research that more women directors translate into more women in senior positions at the company. “Our research,” he says, “uncovers the impact of women helping women at the highest levels of company leadership.”
Relatively few business schools have taken up the cause of director diversity. Yet those with a strong network of high-powered women alumni could have tremendous influence.

“From my perspective, it would be a wonderful opportunity for a business school to focus on this issue, but apart from individual events, there seems to be a limited appetite for it,” says Elisabeth Kelan, an associate professor of management at King’s College London who is doing research on Norway’s quota requiring that women account for at least 40 percent of a board’s directors. She has found that since the quota was introduced, more women not only serve as directors, but more also chair boards and more become CEOs.

She believes business schools may shy away from gender diversity because few academics have in-depth knowledge of the issue. “Having the right faculty is central to having credibility in this area,” she says. “Senior leadership support within a business school also is central to drive such initiatives.”

Ron Alsop is the editor of Workforce Management, the leading magazine on workplace and talent management issues. He is a former Wall Street Journal columnist and editor and the author of The Trophy Kids Grow Up: How the Millennial Generation Is Shaking Up the Workplace and The Wall Street Journal Guide to the Top Business Schools. The Alsop Perspective runs quarterly in Graduate Management News.

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