Locked out of the boardroom

by Herminia Ibarra

INSEAD Knowledge: Locked Out of the Boardroom

When new rules mandating seats for women on corporate boards go into effect in Europe next year, on which side will you be sitting?

There are two camps. Proponents of quotas or other vigorous methods of moving the needle quicker cite the now-numerous studies showing that companies with high numbers of female directors are substantially higher than companies with very few or no female directors on metrics such as return on equity, return on sales, and return on invested capital (e.g. the Catalyst 2007 study). These same companies also tend to have more women in top management and also a longer history of experience with spotting and grooming female talent.

The other camp argues that imposing quotas destroys value. Observing short-term downward movement in share prices after women directors are appointed, the core argument is that financial markets reward operational experience and discount the lack thereof. Studies show that, on average, women appointed to boards after quota laws are passed tend to have less experience as a CEO or owner than men board members; they are more likely to come from professional (e.g. law, accounting) or political backgrounds.
Whatever side you are on, one thing is clear: focusing exclusively on raising the number of women on boards (despite its short-term importance) deflects attention from a harder long-term task: getting more women into the C-suite, often a prerequisite for being seen as ‘board ready.’ Why such a penury of women with the most sought-after line-experience credentials? Three reasons stand out from the research:

First, even today women are less likely than men to have the line experience required to get the top job. A 2011 McKinsey report on women in the U.S. economy showed that 62 percent of the senior women in the largest U.S. corporations are in staff jobs that rarely lead to a CEO role (in contrast, 65 percent of the men on executive committees hold line jobs). For our World Economic Forum Corporate Gender Gap Report (with Saadia Zahidi), we asked the top HR person in the largest companies of 20 OECD countries: “Among the assignments that you consider to be business critical/important, what percentage, in your opinion, are currently held by women (e.g. key start-ups, turnarounds and line roles in key business units of markets)?” The most common answers were “0-10 percent” or “not measured.”

Second, women aren’t getting sponsored into top roles. Our “Why men still get more promotions than women” 2010 Harvard Business Review article explains how this occurs despite the plethora of formal mentoring programmes. Using a sample of 4000+ MBA alumni from 25 top business schools worldwide, we found that having a mentor in 2008 predicted getting promoted in 2010, but only for men. Men’s mentors are more likely than women’s to be CEOs or senior executives and used their power to open doors for their mentees; women’s mentors helped them to become more self aware.

Third, women with stellar performance records can still be held back from top roles because they are not seen as ‘leaderly.’ When we analysed the 360-degree leadership assessments of INSEAD executive education participants (over 2000 executives and the 20,000 associates who rated them), we found many surprises. Our executive women, for instance, were not stereotypically modest: in fact, they rated themselves higher on most leadership competencies than their male peers. And, contrary to what everyone expected, the women’s observers – both male and female—also rated them higher than the men on these competencies. But, there was one big exception to this rosy picture: the women were rated less ‘visionary’ than the men and suffer for it when appointments to high stakes positions get made.

The upshot is that women still don’t have an equal shot at the assignments that increase the likelihood that they will be sought out as both executive and non-executive directors. Until companies make a top priority of ensuring that women get stretch assignments in areas of direct impact on the bottom line, and then re-engineer their performance management and succession planning processes for evidence of subtle gender bias that keep them from these roles, no quotas or no mentoring scheme will get the results we seek.

Herminia Ibarra is professor of organisational behaviour at INSEAD. She is also the programme director for The Leadership Transition.

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I put a "?" because it'll be interesting to see how the 25-35 yo generation shape up in 10 years. The 40s are usually your "time of commandment" and after 50/55, you're just staying around to cash in on all your hard work and impart your experience...

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Over-achieving and under-represented: The case for women on boards
by Angela Garvey Hammond

INSEAD Knowledge: Case For Women On Boards

The Vice President of the European Commission, Viviane Reding, says quotas are the only way to move women into the boardroom quickly enough. But will this really open the door?

Virginia “Ginni” Rometty may not be a name you are familiar with but by the New Year it will be. On 1st January 2012 she takes over the helm at IBM and, as the first female CEO of one of the largest technology companies in the world, her every move in and out of the boardroom will be watched, scrutinised and publicised across the business pages.

Her appointment is a rarity in Corporate America. There are currently only 12 women CEOs/Presidents in the Fortune 500 and while Rometty will be joined by e-Bay founder and erstwhile political contender Meg Whitman, who takes over at Hewlett Packard on the same day, the American boardroom is still a male preserve.

Cross the Atlantic and the European boardroom is a little more diverse but not by much. The reason is simple according to Tina Marron-Partridge, an executive partner at IBM in London. “Men are often looking for mirror images of themselves and that can make it harder for women.” Tina is highly successful and loves her job. She works in a male-dominated environment though that has never bothered her. She says it “took time to learn the rules” but knew she had to make a choice “to ensure the right qualities particularly valued by men were evident."

Change in business culture

The change in culture at IBM is just what Viviane Reding, the Vice President of the European Commission would like to see throughout business. She has made it her mission to see more women sitting in the boardroom around Europe pushing for quotas and legislation as the way forward.

Speaking to INSEAD Knowledge at the Women’s Forum in Deauville recently, she says, “60 percent of graduates are female, but you don’t find them in the workplace later on. And you certainly don’t find them at the level they deserve.”

She is in no doubt talking about the advantages women can bring to the top table particularly in the current economic climate.

“I know the saying about ‘Lehman Sisters and it all wouldn’t have happened.’ Now when I look very seriously at the studies which have been conducted by McKinsey and by Deutsche Bank for instance, it is very interesting to see that yes, de facto, companies with women on board make fewer errors because women are not for unconsidered risk taking... the results become better because less money is lost. Women also ask more questions and if you are forced to give answers, you might not make errors in the economic decision-making. And that is why it is very important to have enough women on boards.”

Of course this debate is not new. The issue over why there are still not enough women in the executive suite, and indeed why there is still a significant gap in pay have been chewed over and argued for years. But there has been some change.

Scandinavian examples

Norway led the way in 2003 - setting down a quota for all listed companies to have 40 percent of their board seats filled by women. It has been achieved and supporters claim a huge corporate success. A study by the University of Michigan is not quite so glowing. It noted that the financial performance of Norwegian companies suffered at least in the short term because of younger, less experienced board members. Other concerns were raised within Norway and outside about the quota system producing higher demand oversupply. The result, critics say, was some of the very capable female directors were being asked to sit on a host of boards, far too many to have the time to be able to add real value to every company.

It is still early days, but seeing what the Norwegians have done, the French and Spanish have adopted a similar system while Germany and the Netherlands are among other European countries still debating the pros and cons of such quotas.

With growing discontent in the UK over what many see as excessive corporate pay by largely male executives, the British government has been keen to promote itself as a strong supporter of women in business. The prime minister, David Cameron, recently spoke of his desire to get rid of the
“usual sort of rotating list of men patting each other's backs and increasing the level of remuneration. I want to see more women in Britain's boardrooms, which I think would have a thoroughly good influence”.

Changes in the UK

Strong words but has any action followed? An independent review by Lord Davies recommended that UK listed companies in the FTSE 100 should aim for at least a quarter of the board to be female and a progress report just published by Cranfield School of Management shows that 21 women have been appointed to board positions out of a possible 93. This represents 22.5 percent of all new appointments, some way short of the 33 percent recommended in the Davies report.

Others though are not leaving it there. Two women in the City of London, a chief executive and a Labour peer, have set up a network known as the 30 Percent Club. The aim is to improve diversity around the top table by getting 30 percent of the seats filled by women. Their method is through motivating and encouraging chairmen to change their attitudes rather that forcing them to via quotas. Critically the club is also about developing the pool of talent just below board level knowing that many in the City say there are just not enough women to fill chief executive posts anyway.

Tina Marron-Partridge of IBM and a member of the 30 Percent Club admits this is partly true. Women make choices and often the higher you go in your job the longer the hours, the further away from home you have to go. So some women opt out. But for those who don’t, often the top promotions elude them because they don’t understand how to really climb the corporate ladder. Marron-Partridge says it’s as much about “networking and packaging communication upwards. Women are very good at getting their head down and producing lots of work. However, getting on is also about looking at the bigger picture, how a company operates upwards and having a point of view to lead the business.”
Viviane Reding embraces that philosophy wholeheartedly. The Vice President of the European Commission is no pushover. She has made it to the top in politics and has a string of honours and awards to her name and yet, of course, as vice president she is still one rung down from the very top. She suggests the problem originates way down the chain of command in business and she is making it her business to find out why. She has been on a networking tour of Europe’s business schools asking what they are doing to open up the boardroom and the thorny issue of pay that is so inextricably linked. Research by INSEAD’s Professor Herminia Ibarra shows that female graduates coming out of top business schools earn considerably less than that their male counterparts on the first day they arrive on the job.

Viviane Reding says, “We see that women who are doing MBAs have achieved very strong MBAs with very good results. And later on, in the workplace, they are passed over by their male colleagues who have not done so well. What can the business schools do in order to help women who are in business, who are in management so that they can become better educated or prepared to be on boards, to be ‘board-proof.’ Women mean business. It is in the interest of the companies to get them promoted, to get them in, to get them work... I think we need to join forces at all levels. At the political level, of course, but also at the business level. And at the level of the business schools in order to fill this deficit.”

It’s a challenging invitation for all the schools in Europe including INSEAD, London Business School and IE in Madrid... all of whom have men at the helm. Harvard is led by a woman.

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Not to defend my alma mater but London Business School was run by a woman for a good long while - Laura Tyson.

Laura Tyson - Wikipedia, the free encyclopedia

Also, Lehman Brothers was actually the most female-friendly I-Bank out there...

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Originally Posted by Gilles de Rais

I put a "?" because it'll be interesting to see how the 25-35 yo generation shape up in 10 years.

And meanwhile we do nothing. So we change nothing, and nothing changes. Just another version of pie in the sky.

Times, they are always a-changing...

To be fair, these articles are concentrating on very special cases - the ones at the tippy top of the pyramid. The fact that female MBA graduates don't marry nearly as much as the male ones say something about society. But it's not a generalised issue. Wrt society wide gender gap, please see below:

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