It’s no longer news – or, at least, it shouldn’t be news – that gender-diverse boards make good business sense. Time and time again, studies have shown that boards with greater gender balance have higher levels of organizational effectiveness and perform better financially. They’re also more diverse in terms of thought and perspective, show more evidence of unity and collegiality, and are associated with better corporate social performance.
As an organization’s most important and visible decision-making body, boards are an obvious target for scrutiny when it comes to assessing gender diversity. For the record, the numbers indicate that parity is a long way off. According to Catalyst’s 2014 Census, women occupied 19.2 per cent of board seats at U.S. stock index companies and 20.8 per cent of seats at Canadian firms.
But in our ongoing focus on boards, are we missing out on what diversity at other levels can show us?
Corporate Knights’ Global 100 ranking methodology was changed several years ago to incorporate a diversity score that measures both board and senior management diversity. The majority of corporate and legislative efforts, however, continue to focus on the board side.
“I’ve wondered for some time why there’s such an exclusive focus on boards,” muses Jennifer Berdahl, who holds the Montalbano Professorship in Leadership Studies: Women and Diversity at the University of British Columbia’s Sauder School of Business. It may be, she says, because boards are subject to more regulation, because it’s generally easier to appoint a woman to a board than to have her hired in a C-suite position, or because board gender diversity is somewhat easier to track and compare.
But there are caveats to focusing too exclusively on diversity at the board director level. “When you appoint a woman to the board, she’s one of many voices around the table,” Berdahl points out. “A CEO or CFO is a singular voice, and therefore much more powerful – which might be why we see fewer women in these positions than on boards today.” In 2013 (the most recent year for which Catalyst has comparable data), women occupied 22.9 per cent of all senior management positions in Canada, while in the United States, women held a stagnant 14.3 per cent of executive officer positions at Fortune 500 companies.
Berdahl also points out that when women are a distinct gender minority on a board, they have less influence (although the opposite holds true for men). She points to research that shows that when boards lose a woman, they tend to replace her with another woman, thus perpetuating the idea that female members are there primarily to represent “the women’s position.”
Further, because boards are at the top of and relatively separate from the day-to-day running of the organization, their gender diversity may have less of an impact. “C-suite people,” Berdahl points out, “have much more influence over creating a work context and climate” that can lead to more support for and recognition of women’s capacity as leaders.
There’s no linear, one-way relationship between the numbers of women in executive positions and on boards, says Rachel Soares, director of research at Catalyst. While more women in the C-suite presumably gives rise to more female board candidates, it’s also true that companies with more women on their boards had greater representation of women at senior management five years later. What’s more, notes Soares, in these cases the women leaders are far more likely to be in the profit-and-loss positions that have been shown to be so valuable for CEO succession and board service.
Both researchers also point to the fallacy that lack of CEO experience is a valid reason for women’s underrepresentation at the board level. A 2012 Catalyst study, for example, revealed that more than 60 per cent of Financial Post 500 board directors do not have CEO experience. Still, women without that notch on their resumes are more likely than non-CEO men to be passed over for board positions, notes Berdahl.
One take-home is that companies and shareholders need to realize that the CEO title alone isn’t a competency for board service. Another, says Soares, is that organizations would do well to groom leaders beyond the (usually male-dominated) CEO successor shortlist for board service, by appointing women to their own or trusted external boards. “We see men benefiting from that relationship more often. But it is one tangible [strategy] that companies can put in place to really focus on the connection between women officers and women directors.”
In short, the relationship between women’s representation at senior management and board levels is complicated and intertwined. And while there may well be some benefit to teasing out the complexities of those relationships, Soares cautions against privileging one metric over the other. (In that light, it’s heartening that, in Canada, seven provinces and two territories have signed on to new requirements for listed companies to disclose representation of women at both board and executive officer levels.) The focus, she says, should rather be on widening the scope and advancing the topic of women’s representation in leadership positions throughout an organization.
Because we don’t need another study to confirm what we already know: that diversity at all levels is good for business.