They’re “pale, male and stale.” That’s the phrase I have heard on more than one occasion to describe the majority of corporate boardrooms. Whether it spoken by a speaker at a Governance Center Crash Course or written in an article by Nell Minow of The Corporate Library (TCL), the words seem to ring true when you look at the recent statistics. The plain truth is most corporate boards in the U.S. and in most of the developed world are being run by older white men.
In these times of change in the marketplace and political upheaval, one has to wonder if it is such a good thing to keep the status quo in the composition of corporate boards. Consider the research unveiled last month by GovernanceMetrics International, the global corporate governance and environmental, social and governance (ESG) research firm that merged with TCL earlier this year:
- Twenty-three global companies have no women on their boards.
- Forty percent of the world’s largest 4,000 companies have not appointed one female member to their boards. (Of that, only one board has a board with a female majority.)
- Women hold only 12 percent of board seats at major U.S. companies.
- One-third of European companies do not have women on their boards.
Those are pretty sobering figures, especially when you consider that it has been 100 years since the first International Women’s Day (March 8). That is a celebration where women throughout the world celebrate the progress that has been made in gender equality. Somehow I don’t see that celebration taking place in corporate boardrooms.
Minow, a GovernanceMetrics International board member and former editor of The Corporate Library, wrote in her Bnet blog, Risky Business, March 8:
“While half of U.S. companies now have at least two women on the board according to the most recent census from Catalyst, a non-profit advocacy group for women in business, 10 percent are still all-male…
“Why can’t boards find women who know the difference between a 10-K and a 10b-5 to serve as directors? I guess they don’t get out much.”
However, some progress may have been made yesterday when two of the world’s largest institutional investors announced a digital resource for “finding untapped diverse talent to serve on corporate boards.” For those of you not following, that’s code word for women and minority director candidates. Granted, it’s not the first effort to seek out competent female and minority candidates but this one might have some traction.
CalSTRS (California State Teachers’ Retirement System) and CalPERS (California Public Employees’ Retirement System) announced Tuesday that they have created an advisory panel whose charge it is to develop the Diverse Director DataSource (aka 3D).
“The Diverse Director DataSource is all about finding talented people with the knowledge and ability to invigorate a corporate board,” said Anne Simpson, senior portfolio manager, CalPERS head of corporate governance. “This is an important step toward challenging ‘group think’ in corporate boardrooms, which we have learned from the financial crisis can have a devastating impact on the ability to question assumptions.”
Anne Sheehan, CalSTRS director of corporate governance, resonated the importance of having a truly diverse board. “There is demonstrated economic value from having a board of directors that is diverse not only in gender but in age and experience, and we believe that makes it a shareowner value issue,” Sheehan said. “The candidate qualifications will still have to meet the company’s needs, but the final decision should be made by shareowners when they vote.”
Both organizations have hired The Corporate Library to develop the Diverse Director DataSource, hoping to tap that not-for-profit corporate governance research company’s database of more than 130,000 public company directors. The 16-member advisory panel includes people from all different facets of corporate governance, such as Ira Millstein, senior partner of Weil, Gotshal & Manges and corporate governance dean at Yale School of Management; Douglas Chia, assistant general counsel and corporate secretary for Johnson & Johnson; Julie Hembrock Daum, practice co-leader for the North American Board and CEO Succession Practice at Spencer Stuart; AnnYerger, executive director of the Council of Institutional Investors; and Richard Koppes, a fellow at Stanford Law School.
As I mentioned, this isn’t the first attempt to create such a specific director database. In fact, it’s not even the first attempt this year to do so. In a Dec. 3, 2010 post, I mentioned the efforts of Agenda, a Financial Times electronic newsletter. That publication in September 2010 published its first Agenda Top 100 Diverse Board Candidates after seating a panel of 14 corporate governance experts to determine the standards for the prospective candidates. The timing of the publication was meant to coincide with the first year of the enhanced SEC disclosures and the section of the Dodd-Frank Act that requires regulators to create diversity watchdogs to monitor the regulators and with whom they do business.
The 2010 amendments to Item 407(c) of Regulation S-K, which went into effect in March 2010, require disclosure of whether, and if so how, a nominating committee considers diversity in identifying nominees for director. In addition, if the nominating committee (or the board) has a policy with regard to the consideration of diversity in identifying director nominees, the company must disclose how the policy is implemented, as well as how the nominating committee (or the board) assesses the effectiveness of its policy.
In the introduction to the Agenda Diversity 100, Editor Tony Chapelle wrote:
“The topic of diversity is forcing its way onto boardroom agendas perhaps more so now than at any other time in the history of corporate America. The impetus is mainly coming from Washington.”
In the end, many corporations don’t want to be told by Washington or any other governmental body what to do to make their boards more diverse. Maybe the efforts of CalPERS and CalSTRS might finally make a difference in the quest for truly diverse boards in the United States and even the world.