Women at the top?

Alison Arnot wonders why there aren't more women on boards

Heather Shaw is executive chair of the media company Corus Entertainment Inc, which owns several Canadian television and radio stations, as well as Nelvana Limited, a producer of animated children's shows that are recognised worldwide, including Babar and Franklin. Shaw, who is one of only three female corporate chairs in Canada, oversees a board consisting of 10 other directors, four of which are women.

The 45% representation by women on the Corus board is more of an exception than the norm for corporate boards worldwide. According to the 2003 Catalyst Census of Women Board Directors, women held 11.2% of board director positions in Canada's top 500 companies. Meanwhile, half of the companies (51.4%) had no women on their boards at all. Statistics for the US were better, with women holding 13.6% of the corporate board seats in Fortune 500 companies, while only 10% of these companies had no women directors.

Although not stellar, these North American figures are higher than the European average of 8%. The European Professional Women's Network (EPWN) reports that the UK (at approximately 10%), Germany (10%) and France (6%) fall in the middle of Europe's rankings, while Italy (2%), Belgium (3%), and Spain (3%) have the lowest percentage of women on boards. However, Norway and Sweden lead the pack internationally with 22% and 20% representation respectively. Still, they are far from reflecting the composition of the general population.

Why? With the progress women have made in the workplace over the past few decades, why have they still not entered the corporate boardroom in greater numbers? The US not-for-profit research organisation Catalyst recently surveyed senior-level men and women of similar backgrounds on what barriers they faced in their career advancement. Both gender groups described hurdles like 'displaying a style different than organisational norm' and 'lack of awareness of organisational politics'. However, women faced additional barriers that few men encountered, such as 'exclusion from informal networks', 'gender-based stereotypes', and 'lack of role models'.

Still, Heather Shaw has not had any difficulty finding women candidates for the Corus board. 'I approach it somewhat differently than I think many do,' she says. 'I don't look at the CEO pool' If you limit yourself to that pool, yes, it would be very difficult to get women.' Shaw advises broadening the skill set and areas of expertise expected of corporate board members. 'You want to have a really diverse group of experience on the board. If you get it from one pool, people tend to think the same way.' 'Companies have to go out and search in unusual and different places,' agrees Margaret Milan, director of the EPWN's Think Tank. 'There has to be some acceptance of taking women who've had alternative paths, may that be through entrepreneurship, running non-profits, or whatever.'

Not only do companies need to increase the number of women on their boards, they also need to view balanced gender representation as beneficial to the business, a fact supported by worldwide research.

'Women are now much more likely to be shareholders, community leaders, major purchasers, policymakers, and active members of the business world than ever before, so having the female perspective at the decision-making table is good business sense,' says Dr Val Singh, senior research fellow at the Centre for Developing Women Business Leaders at the Cranfield School of Management in England.

For the past five years, Dr Singh and Professor Susan Vinnicombe have researched Britain's top 100 companies to compile the Female FTSE Index. 'We have found that companies with excellent corporate governance practices (albeit self-reported in their annual reports and on their websites) are those most likely to have women on the board,' says Singh. 'We have also found that companies with higher market capitalisation are significantly more likely to have women directors.'

Catalyst has similarly found that companies with a higher representation of women in senior management positions financially outperform those with fewer women at the top. Of the 353 companies that were on the F500 list for four years between 1996 and 2000, the group with the highest number of women on their senior management teams had a 35% higher return on equity and a 34% higher total return to shareholders than companies with the lowest representation of women.

'If you think about the companies that are the most successful in the world, and the culture of the environment they engender, it's not surprising that there would be a tie between gender diversity and the actual health and well being of a company,' says Deborah Soon, Catalyst's Vice President of executive leadership initiatives. 'What it signals is a diversity of perspective' a greater ability to think outside the box. That only happens when you have an environment that's not entirely homogeneous. You can't come up with those breakthrough ideas if you've got 'groupthink' operating.'

Diversity and performance

The Conference Board of Canada has also found a link between gender diversity at the board level and better corporate performance. According to a 2002 report, corporations with two or more women on the board in 1995 were far more likely to be industry leaders in revenues and profits six years later.

All these findings indicate a link between a leadership that includes women and financial performance, but not necessarily a cause-and-effect relationship. 'Do women on boards lead to improved corporate performance, or does improved corporate performance lead to more women on boards?' the Conference Board asks. To answer this question, the not-for-profit research organisation monitored any changes that occurred inside organisations as women took leadership roles. The presence of women affected governance practices associated with more active and independent boards, which are considered contributors to improved organisational performance - in sales growth, long term return, or industry leadership.

So, in light of this evidence, how do organisations eliminate the hurdles that women have traditionally faced? Several initiatives have been implemented to give them a hand.

Five years ago, the Norwegian Government threatened to introduce legislation requiring at least 40% women representation on corporate boards. 'I'm not particularly in favour of imposing quotas,' says Milan. 'However, the fact that they said 'We're going to do this if you don't get your act together' forced the companies and umbrella organisations to start thinking about how they should address this issue.' The NHO (Confederation of Norwegian Business and Industry) launched a pilot project called 'Female Future', aimed at improving female representation while also focusing on quality. Its Female Future Network includes a database of talented women from which companies can select board candidates.

'The threat of legislation has worked in Norway, where an increasing number of boards have women directors,' says Singh. 'However, in the UK, such a practice would incur a strong backlash, not least from women directors and would-be directors.'

A different approach has been taken in the UK with the launch in 2004 of a mentoring program involving various stakeholders, including almost a quarter of the FTSE 100 companies. 'Chairmen are mentoring talented and very senior women from other companies in the FTSE, on a reciprocal basis with non-competitors,' Singh explains. 'The women mentees have formed a network to support their later candidacy for directorships.'

Smaller initiatives have also taken place across the globe. For example, reeling from the results of the EPWN survey indicating that, in the Netherlands, women hold only 7% of board positions, a group in Amsterdam has established a website, called Women in the Picture, to promote women qualified for board positions. And, in Canada, a Vancouver-based association has published a directory, entitled Women in the Lead, listing 550 women qualified to take a seat at the directors' table.

With the corporate scandals in recent years, there's been increased attention on corporate governance issues, such as board composition. 'Nobody spoke about this five years ago,' says Milan. 'Boards were a cosy place that you went to when you had finished with your business career' Once [corporate governance] came back on the table, then there was the question, 'Does greater diversity lead to less cosiness, less back-scratching, and more objective governance?''

The research indicates the answer is yes.

Alison Arnot is a freelance writer and editor based in Ottawa.