The Oracle of Omaha, Warren Buffet, has said his success is partly due to the fact that he only needed to compete with half the population.[i] Unfortunately, when surveying the landscape of corporate America, it appears that, as is generally the case, Buffet is correct in his assessment. While women continue to outpace men in educational achievement, this has not translated to increased representation of women in the corporate sphere. This is significant because boards of directors make important decisions to control the direction of a company. At the current rate, it will take more than four decades before women’s representation on corporate boards reaches parity with that of men. Women represent 44.7% of the labor force and comprise 36.9% of mid-level managerial positions; yet, they hold only 21.2% of board seats, 26.5% of senior management positions and only 5.2% of CEO positions.[ii]
Women face numerous obstacles in their rise to senior positions. Firstly, it is challenging for women to attain board positions when the prerequisite is often experience in a senior management position, a level at which they already face significant underrepresentation. Secondly, the workplace has failed to accommodate mothers and provide the flexibility that they need in balancing child-rearing and their professional life. This has enabled the creation of a class of dependent women who adjust their careers to accommodate their spouses, further enabling men to continue to dominate the public sphere. Motherhood triggers assumptions that women are less committed to their jobs, and therefore, less qualified. While women and men both practice work-life balance, they do not share the same burdens because women typically disproportionately bear the costs of having a family.
Furthermore, the male-driven culture is a hindrance to women’s success as they face pressure to conform to established male norms. Women and men are biologically different and there are cultural norms and stereotypes to which each gender is expected to conform. If women stray from what is expected, it hurts their chances of success. The male-dominant corporate culture only reinforces this notion by appointing male directors who they know will “fit in” with the status quo.
Moreover, the “glass ceiling” that caps women’s success also prevents highly successful women from reaching positions where they are able to receive the proper mentorship and sponsorship opportunities that men have. In the unlikely event that women do receive such mentorship, the advice is usually skewed by unexamined mindsets in the workforce or lacks the proper direction. For the first time in American history, single women outnumber married women. This has significant ramifications, as there are a greater number of women who are independent and the workforce will presumably need to adjust accordingly. However, the extent to which single women will stimulate change depends on women stepping up to call for the change they desire.
Where women are represented in boardrooms, certain patterns have emerged. A lack of a “critical mass” of women hinders women’s ability to have their voices heard. Moreover, there is a pattern of boards appointing one “trophy” woman to multiple boards, creating the illusion that companies care about diversity and inclusiveness, when in reality, companies are recycling the same women. In other cases, corporations fail to find the lack of diversity in board positions problematic and therefore do not prioritize remedying the issue at all.
The Bottom Line
Why should companies care about diversity at all? Diversity is important because investors’ care about the equity returns in their companies (which are affected by board heterogeneity), and the concept of the “business case” is in line with their investment agenda. Another argument is a moral argument, which argues that diversity is important because it is the “right thing to do.” Appointing more women on boards would be a more accurate reflection of society and signal to consumers the value companies place on equal representation.
While initiatives to improve diversity on boards exist, these efforts have fallen short. Overall, there is an absence of legislation on the state level. However, there have been some voluntary approaches aimed at setting target numbers of women on boards. Regulation S-K, put forth by the SEC, mandates disclosure of a company’s board composition, but the law is more suggestive than compulsory in nature and has yet to yield significant change. Compared to countries around the world that have taken a more hard-line approach by instituting mandatory quotas, the United States lags behind in increasing gender equality on boards.
When speaking in front of a crowd of mostly men in Saudi Arabia, Bill Gates was asked by an audience member whether Saudi Arabia could achieve the status of a top 10 technological country in the world. He responded, “Well, if you’re not fully utilizing half the talent in the country, you’re not going to get too close to the Top 10.”[iii]
My Note can be found in Vol. XXII, Book 2 of the Journal, here. I look forward to your comments.
[i] Sheryl Sandberg, Lean In: Women, Work and the Will to Lead 6 (2013).
[ii] Catalyst, http://www.catalyst.org/knowledge/women-sp-500-companies (last visited Sept. 15, 2017).
[iii] Nicholas Kristof & Sheryl WuDunn, The Women’s Crusade, The NY Times (Aug. 17, 2009) http://www.nytimes.com/2009/08/23/magazine/23Women-t.html.