NEW YORK, NY – October 7, 2010 – A majority of women in the boardroom believe that board diversity is key to restoring trust after the economic crisis, but only about half of men and women directors think their boards are doing a good job of advancing diversity.
Striking gap in views on regulation, diversity, risk management, and board effectiveness, according to new research conducted by Heidrick & Struggles, WomenCorporateDirectors (WCD), and Dr. Boris Groysberg of the Harvard Business School.“There is a disconnect between what women directors feel must be done and what‟s actually happening in the boardroom,” says Bonnie Gwin, Managing Partner of Heidrick & Struggles‟ North American Board of Directors Practice.
The survey of nearly 400 male and female board directors reveals striking differences in how men and women think about some of the biggest issues boards face today. “There is a significant gender divide in how men and women directors believe that boards should rebuild trust, as well as in rating how their boards are performing their fundamental responsibilities,” says Susan Stautberg, co-founder and co-chair of WCD, the only global community of women corporate directors.
“Women directors, more than men, seem open to challenging the status quo,” adds Ms. Stautberg. “The issue of diversity, in particular, elicited a sharp division among the men and women we surveyed, especially around the topic of quotas in the boardroom and how regulatory changes will affect diverse representation on boards.”
Opinions on board effectiveness were also divided. “Women directors who responded were somewhat more critical of their boards‟ performance vs. their male counterparts,” says Dr. Groysberg. “Our survey suggests that there are still a lot of challenges as well as opportunities to improve effectiveness, truly leverage diversity, and carefully think through regulations directed at boards.”
The Heidrick & Struggles/WCD/Groysberg survey was conducted in the Spring of 2010 by Dr. Groysberg, the Thomas S. Murphy Associate Professor of Business Administration at the Harvard Business School, and Deborah Bell, a Research Associate at Harvard Business School. Respondents included 294 WCD members and 104 male directors of public companies.
Key differentiators between women and men board directors emerged in the areas of:
How to rebuild trust in corporate boards after the shock of the financial crisis: Women seem to have much greater faith than men that increased boardroom diversity (65% of women vs. 35% of men), new regulations regarding executive compensation (45% vs. 22%) and proxy access (38% vs. 17%), and, especially, enhanced risk management systems (40% vs. 1%) would help restore trust. “This finding was one of the most revealing of the whole survey,” says Ms. Gwin. “Interestingly, a clear majority of women directors expressed their feeling that more diversity in the boardroom would have a positive impact on rebuilding trust in boards. In addition, women directors preferred increased oversight, including a significant number who supported more regulation around executive compensation and enhancing proxy access. The women directors surveyed seem to express a feeling that the status quo has not worked and that they are open to more aggressive changes to rebuild stakeholder trust in boards.”
Boardroom diversity and the impact on board effectiveness: More women directors than men felt that three or more women on a board made it more effective (51% vs. 12%) and that women brought unique attributes to a board (90% vs. 56%).
Diversity quotas and regulations: Quotas continue to be a controversial and divisive topic. While many more women than men (25% to 1%) supported them in the survey, the majority of responses from both genders did not favor instituting these requirements. Women also were much more supportive of the new SEC rule requiring nominating committees to explain in proxies the role that diversity plays when selecting new directors (62% vs. 43%). Men generally were more skeptical that new board governance regulations would improve diversity on boards. “It is interesting to see in the survey and in our conversations with women directors around the world how the idea of quotas is gaining traction,” says Alison Winter, co-founder and co-chair of WCD, “especially given what is happening in Europe, where various countries are moving toward new regulations that require anywhere from a 20% to a 40% female quota in the boardroom. This alone raises the consciousness of nominating committees around the subject of diversity when considering new board candidates.”
Opinion of board performance and effectiveness in key areas: A significant number of both men and women directors felt that their boards were not highly effective in either succession planning or advancing diversity. Only 59% of women respondents and 61% of men rated their own board‟s succession planning process as “good” or “excellent,” and only 51% and 53%, respectively, cited their board‟s advancement of diversity on the board and throughout the company as “good” or “excellent.” However, women directors were somewhat more critical than men of their boards‟ performance and effectiveness in ensuring appropriate and competitive compensation practices (only 71% viewed their company as “good/excellent” in this area vs. 81% of men), and performance assessment processes (59% of women agree that the process is effective vs. 67% of men).
Path to board service: About equal numbers of women and men respondents reported that they had actively sought their first board seats, but, despite the intense public focus on and support for increased boardroom diversity, it still took women a year longer to achieve their seats – 2.4 years vs. 1.4 years. Women see their positions enhanced more by board service than men do (31% cited that they serve on boards “for the prestige conferred by sitting on this particular board” vs. 18% of men, while 81% said that “serving on this board has enhanced my professional reputation” vs. 68% of men). Also, more women directors than men have advanced degrees (87% vs. 74%).
“The survey overall revealed several major disconnects between what women directors believe is needed and what is actually happening in the boardroom,” says Ms. Gwin. “For instance, while a majority of women believe that having a diverse board would help rebuild trust, only about half the women surveyed thought that their companies/boards were effective in promoting diversity at the board or executive level. This fact, taken together with the longer lead time for women versus men in landing a board seat, speaks to a real „diversity gap‟ that continues to affect corporate boardrooms across the U.S.”
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