WASHINGTON'S LEADING BUSINESS MAGAZINE

CEO Adviser: Sexism in the boardroom

Gender Imbalance on the leadership team leads to lower profits.
Susan Bloch |   May 2013   |  FROM THE PRINT EDITION

In greater Seattle today, fewer than 10 percent of corporate board members are women. While blue-chip champions like Nordstrom and Starbucks have a higher-than-average percentage of women on their boards, tech companies like Microsoft and Amazon don’t do as well, and the numbers for startups are dismal. Should you care?

Absolutely. Research indicates that a more diverse leadership team delivers stronger results. A study by Catalyst, a worldwide research company, concluded that organizations with a better gender balance at board level enjoy a 53 percent higher return on equity and a 73 percent return on sales. Consultant McKinsey & Co. found that the top quartile of companies with women on their executive committees had a 56 percent better operating result than the top quartile of companies without women on their boards.

Why? Well, for one thing, a gender-balanced executive team can be closer to its customers. Women are more likely than men to target alternative customer segments or implement innovative

ways to sell their products and services. Speaking at the Davos world leaders’ conference in January, Christine Lagarde, managing director of the International Monetary Fund, pointed out that women control 70 percent of consumer spending, including automobile and personal computer purchases. Globally, women control about $20 trillion of consumer spending.

Businesses should be aware that by not placing women in the highest positions, they are failing to tap the varied talents of a full half of the population. Gender-diverse teams offer a range of leadership styles, contributing differing points of view when decisions need to be made.

And the truth is that male-dominated boards have not had a stellar track record. Four years ago, risky trading in unsafe securities, and poor governance contributed to the collapse of many large, poorly supervised financial companies, plunging the economy into a deep recession.

According to a 2011 report by the CFO Roundtable, boards composed of at least 20 percent women, by contrast, do a better job of managing risk.

“A highly effective board should be representative of all the stakeholders of a firm, including women customers, staff and shareholders,” says Marinilka Kimbro, who teaches accounting at Seattle University’s Albers School of Business and Economics. Research, she says, suggests boards with more women tend to have fewer accounting and auditing issues.

Many companies today recruit accomplished women, but these women seldom make it to the top of the corporate ladder. That’s partly because women tend to have a greater a distaste for office politics, and are more likely to take on the care of children and aging parents. But Cate Goethals, who teaches an MBA class called “Women at the Top” at the University of Washington’s Foster School of Business, says there could be another reason: “If the majority of board members have been men and a picture of a male is what appears in people’s heads when they hear ‘board member,’” says Goethals, “who do they look for and believe is best qualified?”

There are measures organizations can take to be more active in identifying and nurturing their talent. Senior managers need to stop assuming that the men who advocate for themselves most aggressively will be the most effective choices. Women, too, need to develop greater confidence and learn to advance themselves, finding mentors who will sponsor their journeys to the top.

These changes will only be effective if the promotion of women is seen as a strategic commercial issue. The question needs to be reframed: It is not a failure of equal opportunities so much as a failure to engage the best people. Increasing the number of women on corporate boards is not only good for women individually and collectively; it’s also good for business and the economy.

Seattle is home to major global brands like Starbucks, Microsoft, Amazon and Boeing. It’s also a thriving hub for startups. Companies here should take a leading role in placing gender diversity firmly on their boards’ agendas. The problem of female underrepresentation is solvable, provided it is seen as a business imperative. The all-male board in the 21st century is an anachronism and makes no business sense. It’s time to do better.

 

Seattle-based leadership coach SUSAN BLOCH is the author of three books: The Global You, How to Manage in a Flat World and Complete Leadership.