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Increasing the number of women in the boardroom
A two-way street
Corporate boards looking to add women to their ranks might need to open their aperture to see the benefits, forward-looking views and skillsets that gender diversity could bring to boardroom discussions.
An interview with Deb DeHaas
Vice Chair, National Managing Partner, Center for Board Effectiveness and Chief Inclusion Officer, Deloitte LLP
Corporate boards looking to add women to their ranks might need to open their aperture to see the benefits, forward-looking views and skillsets that gender diversity could bring to boardroom discussions, says Deborah DeHaas, vice chair, national managing partner, Center for Board Effectiveness and chief inclusion officer at Deloitte LLP. Meanwhile, she notes that women who seek board positions should continue to focus on how their expertise, experiences or attributes would make them viable candidates and have a clear vision of what they seek from the companies they’re targeting for board-level opportunities. And for anyone considering a board seat, regardless of gender, a company’s cultural fit should be a main consideration.
Deb DeHaas: The first thing to consider is the empirical data. Numerous studies have found that companies with women on their boards outperform those with less gender diversity on their boards, in terms of share price and performance, as well as certain financial metrics, including return on equity. Other studies have found that having more women on boards and their impact on decision-making can enhance shareholder value.
Another factor for directors to consider is who they are surrounding themselves with in the boardroom and what views and experiences women can bring to help ensure that issues get looked at from multiple angles. As the issues that corporate boards face today become more complex, including cyber and security risk, technology, activism, etc, boards are increasingly recognizing that having a board composition that brings diversity of thought and perspectives can make a critical difference in their understanding of these issues and in the effectiveness of their decisions.
Q: What benefits can organizations expect by increasing the number of women on their boards?
Deb DeHaas: Boards should be looking at skills, and not necessarily titles particularly given that women hold less than 5% of the Fortune 500 CEO positions. Traditional thinking on board composition felt that a director needed to have been a sitting CEO or another highly ranked C-suite executive. That view is changing, particularly as organizations have begun to limit the number of boards that their own CEOs can serve on. As a result, there are fewer corporate CEOs now available to sit on boards, which will hopefully encourage organizations to consider a wider pool of candidates. And as boards become more comfortable with considering a business unit CEO as a candidate, or a private company CEO or a CFO, that has widened opportunities for more women candidates.
We know from our 2014 Deloitte Board Practices Report, conducted with the Society of Corporate Secretaries & Governance Professionals, that boards typically identify new members through existing relationships. While many boards employ a search firm, our study found that close to three-quarters of new board members are still selected through relationships with other board members. So it’s important to ask boards to consider board diversity based on gender, ethnicity, age and other perspectives as they look to fill positions, and to urge them to consider their extended networks both in business and in their communities if we hope to expand the diversity in the boardroom.
Q: For organizations wanting to diversify their boards, whether in terms of gender, backgrounds, ethnicity, age, etc., what should they consider?
Deb DeHaas: It’s important for women who aspire to be on boards to expand their personal networks and build a diverse set of relationships. At the same time, it’s also important to create opportunities for others outside of their organizations, as relationships with those individuals may one day translate into opportunities in the boardroom.
They also need to make others aware of their interest in serving as a director, but in a strategic way and at the appropriate time. Just raising your hand and asking for a board position may not be the ideal way to get your interest noticed. Rather, ask other senior board members and business leaders for advice on how to position yourself for a board and recognize that it may require first spending time either on private company or smaller boards to position yourself for a larger public company board.
Other factors to consider are the skills and experiences that are being valued most highly in the boardroom today. To obtain a better understanding of what these might be, look at the key risks and challenges facing organizations and boards, such as cybersecurity, technology disruption, customer segmentation, and market competitiveness, as well as more traditional financial and operational risks. These developments can help make a persuasive argument for the board to bring in candidates with more diverse backgrounds or those that are potentially more generationally diverse. Anyone interested in serving as a director should watch these and other governance trends carefully, and develop a plan to position their skills and experiences most effectively.
Q: What else can women do to strengthen their board candidacy?
Deb DeHaas: Doing proper due diligence before taking on a board position is critical. For a candidate, it’s important to understand the culture in that boardroom. Is it a culture where a new director, and potentially a woman director, is going to be able to have a voice, be accepted and be successful? It’s important to understand how the board operates, how the committees work and how decisions are reached. If a candidate knows someone on the board who can provide insights into the processes and internal workings of the board, that can be helpful to determine whether a board and the company it represents would be a cultural fit. It will also be important to meet other members of the board and management to assess the cultural fit as well. Finally, it is critical to understand the current situation of the company and any unique or significant risks that either the company or the industry it resides in faces today. Prospective board candidates should thoroughly review all available public information, including financial filings, analysts’ reports, etc., before taking on a board role and should feel confident that their experiences and skills would allow them to be a highly effective and contributing board member of that organization.
Q: How can those seeking a director position assess whether a board would be a good fit?
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