Human Resources

Board composition changing, but pace of change still dragging

Study finds more women and minorities are landing positions, but the search parameters need scrutiny.

May 26, 2017
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There are more women on public company boards than ever, but there still is a long way to go to reach the levels many would like to see.

According to a recent report by Deloitte, “2016 Board Practices Report,” more than 25 percent of the boards surveyed added a woman to their board in the last year and 38 percent have three or more female directors.

However, Deloitte also released its “Missing Pieces” report for 2016, and the multi-year study indicated a slowly changing boardroom when it comes to women and minorities.

“If there is some good news in 2016, it’s that for the first time, it’s the most diverse that the Fortune 500 boards have been since 2004, when tracking began,” said Deb DeHaas, vice chairman at Deloitte.

DeHaas reiterated the pace of change is slow, though. She noted Deloitte’s research partner on the “Missing Pieces” study, Alliance for Board Diversity, has a goal of seeing women and minorities make up at least 40 percent of corporate board seats by 2020.

“That 40-percent goal, if you track the pace of change, it appears unlikely it will be met by 2020 if it continues at the same rate,” she said.

She also noted minorities have made less progress.

“There’s been more progress, relatively speaking, for women versus minority representation,” DeHaas said. “We tracked pure number of seats that have changed, and largely Caucasian men have been replaced by Caucasian women.”

Terry Barclay, president and CEO for Inforum, a professional organization focused on women in leadership in Michigan, said Michigan is in line with the rest of the country in terms of female representation on boards.

Inforum publishes the Michigan Women’s Leadership Index every two years, which looks at female representation on the state’s corporate boards. The study looks at how many women directors a board has, the makeup of a board’s top five compensated officers and the composition of all executive officers.

“If I had to summarize, if you look at the overall average data, there really has been very little movement in the data for the last decade plus,” Barclay said. “What we are finding is the companies that were already good are getting better faster.”

Barclay said the “rock star” of the state is General Motors.

She said General Motors being the first major auto company run by a female CEO (Mary Barra) isn’t the only reason the company won that accolade.

“The progress with the GM board began many years ago and has been sustained over multiple CEOs,” she said. “They are certainly the best in the auto sector and best board diversity overall.

“Another standout is Kelly Services. They are one of the top companies in their size class. They have 44 percent women officers in 2015.”

Recent board composition trends might not help facilitate that change.

Deloitte’s Board Practices report found the top areas of expertise boards are looking for in directors include someone who is or has been a CEO and individuals with financial expertise. DeHaas said boards also are looking for individuals with IT experience, particularly chief information officers, as cyber security risk grows.

These are all areas where women are underrepresented.

“Some boards are looking for 40 to 50 percent of board members with CEO experience,” DeHaas said.

Barclay said 40 percent of new directors on Michigan’s Fortune 500 boards are sitting or prior CEOs.

“If the priority is getting board candidates with a CEO title, right off the bat, the field is getting narrowed considerably, and that is going to impact women and minorities in a significant way,” she said. “What we’ve found is those companies that dig a little deeper and look at the scale and scope of responsibility of women executives who do not have CEO in their titles and then recruit that level to their boards, those are the companies making progress on diversity.”

Barclay said many of those women are running divisions that are larger than the company whose board on which they would serve.

“That is one example of how to cast a wider net and a productive wider net, not just a politically correct approach, but a performance- and qualification-driven approach to searching for diversity,” she said.

Barclay said this approach works in searching for female candidates with financial and IT experience, too.

“They may not be the CIO, but if you look at their responsibility, they may have, from a managerial and leadership perspective, the same experience and, therefore, would be valuable additions to boards.”

Lou Moran, managing partner for Deloitte’s West Michigan office, said diversity is very much on the minds of West Michigan companies.

“We oftentimes will get requests from clients to provide names or résumés for diverse candidates when they have openings on their boards,” he said. “West Michigan is a microcosm of what we are seeing nationally.”

Even with boards reaching out to search firms to identify board candidates, personal networks still tend to have a big impact on recruitment.

“More than half of new board members do come from someone’s networks,” DeHaas said.

Barclay offered some advice on how women can gain more seats on public company boards.

“There’s a lot women can do to raise their visibility and get their names into consideration for board positions,” she said.

First, she said it helps to take some time clarifying your board objectives.

“I think people can benefit from disciplined thinking about identifying targets, what types of companies can I add value to with my skill set?” she said. “They can benefit from developing a crisp board bio and being crisp about how they network and talk to others to express their interest and explain what they are looking for and why they’d be value-added and to do it succinctly.”

She also said women need to build their networks and not be afraid to ask for sponsorship.

“One of the best examples I’ve seen was a person who had an engineering background and was a director level in an auto company — so not the CEO of the company — who got the chairman and CEO of her company to be her sponsor.

“She was able to explain to him that she was interested in board positions and what kinds of positions she was looking for, and the next time he got a call trying to recruit him, he recommended her and she got the board position. It’s at a major public company, national in scope. That is an example of how to do the strategic networking to get there.”

Overall, DeHaas, Barclay and Moran all are optimistic boards will continue to make progress in the area of diversity.

“I have a sense of optimism about this. I’ve been doing this for a while, and I feel we are at the cusp of seeing some movement. I would say be persistent, now is the time to go after this,” Barclay said.

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