The United States is experiencing never-seen-before pressure to place women in high positions, and that includes entrance to the boardroom. While advocates for women's rights and diversity in the workplace have been advocating for years, the United States is falling behind most western countries when it comes to the number of women in boardroom positions. In fact, according to a report by Corporate Women Directors International, it was found that the number of women on big company boards has tripled in countries like Italy and Germany. Furthermore, in France in 2011, a law was passed that requires blue-chip firms to have at least 40 percent of board seats occupied by women.
The Evolution of the Boardroom
According to Sophie Bellon, chairwoman of Sodexo SA, who has also joined the board of cosmetics giant L'Oreal SA, says that these quotas, such as the one in France, is pressing companies to recruit for more female board directors that have the skills and talents companies want. For this reason, more energy and resources are going into aggressive recruiting strategies. However, even with these mandates, we have seen little improvement in getting women "on board."
For example, take Norway into consideration. This was the first EU country to set a quota on hiring women onto corporate boards. With a quota of 40% that was instituted nearly a decade ago, however, we find that out of Norway's biggest 200 companies, only 15 have women in the boardroom. This is about the same as the United States.
Today, in the UK, about 26% of women make up company board seats. However, the government is looking to change this. In fact, a government-backed, business-led commission is persuading major firms to fill at least a third of their boardroom seats with female applicants. The government also publishes an annual report that lists the best and worst company performers according to this measurement.
In the United States, we are starting to see an even more aggressive approach. Several investors such as State Street Global Advisors and state pension funds in Massachusetts, California and New York, are pushing for more diversity in the boardroom and have even threatened to vote against those board members whose firms lack female counterparts in the boardroom. These investors argue that research has shown that having women in powerful boardroom positions makes for a stronger, long-term financial performance on the part of the company. Furthermore, boards with few or no women members tend to suffer more corporate governance-related scandals than those who have women on board. On the other hand, critics of this research state that it is difficult to actually prove that women in the boardroom cause a more positive outcome.
Still, the push for more women directors on boards is not slowing down. In fact, BlackRock Inc, which is the world's largest money manager, says that the companies it invests in should have, at the minimum, two women directors. Furthermore, New York State Common Retirement Fund said it would not support the re-election of corporate board members in the United States who have boards lacking women.
According to Eileen Nugent, mergers and acquisitions partner at Skadden, these kinds of efforts are picking up the pace but not as fast as we would like. To further illustrate, in the first quarter of 2018, according to Equilar, a research firm that gathers data on executives and boards, only 32% of board seats at Russell 3000 companies were filled by women. This is up from 29.4% for all of 2017 and 21.4% in 2016.
Beth Stewart from the firm Trewstar Corporate Board Services says that these investors are certainly having an impact on women gaining seats in the boardroom. In fact, in the first quarter of 2018, Stewart has placed more women on boards that were made up of only men than she did in 2017.
However, even those who want boardroom diversity are hesitant when it comes to these mandates, such as those seen in many countries in Europe. According to Rakhi Kumar, a senior managing director at State Street, it is not effective to rush into complying with quotas and mandates for diversity that could create new problems. Still, investors like State Street are really making change despite this hesitation. State Street has put on notice hundreds of companies across the United States, UK, and Australia who lack women in the boardroom. In the end, State Street voted against those company directors who lack diversity progress. Of those hundreds who were put on notice, 152 companies have since complied by recruiting at least one female director, while 34 more companies have promised to do so.
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