We Need More Women Board Directors

Why We Need More Women Board Directors

by Bonnie Gwin and Susan Stautberg

The lack of diversity in America's boardrooms is a real concern; still, the business value of having a diverse board continues to be debated.

Based on our experience studying and working with boards of directors, bringing diverse experiences to the board - multitalented, multicultural, multiregional and multigenerational, including those of women leaders - paves the way for fresh thinking and hard discussions on "Why do we do things this way?"

When companies mix it up at the board level by adding people who don't have ties to senior management and who are willing to challenge assumptions, they are bound to be better risk managers. These directors are likely to take a fresh look at risk and will not be bound by history.

By way of example, one woman director said she feels OK asking the most basic questions because she doesn't have a long history on her current board. She can ask them from her vantage point as the newest director, but this also allows her to root out old habits and ways of doing business that others hesitate to question.

Since women are nearly always the newest board members, they can often ask fundamental questions that more seasoned directors don't feel comfortable raising. As another female board member notes, her male board colleagues - who have a close relationship with the CEO - often ask her to tee up particular questions on their behalf. These tend to be the harder, tougher questions that they don't want to ask.

Women make valuable board members for the same reasons men do - their functional knowledge, skills and expertise. Since women have faced different obstacles in the workplace, they often have different life experiences to bring to the decision-making process. These experiences can add up to fresh insights and unique strategic thinking about the business.

In fact, studies show that companies with higher percentages of women board directors on average outperform those with the lowest percentages of women board directors on a variety of financial measures.

For example, a 2007 Catalyst study of Fortune 500 companies found that return on equity for companies in the top quartile of women directors was 13.9 percent, compared with 9.1 percent for the bottom quartile.

While research suggests a correlation between more women board members and business success, it doesn't necessarily mean that the presence of women on boards causes higher performance. It may be that companies with more women on their boards are also more progressive and forward-thinking.

Regardless, the percentage of women on corporate boards remains low. Catalyst's 2008 study of directors at Fortune 500 companies found that only 15.2 percent were women. However, toward the end of 2008, a new trend emerged as companies began to broaden their boards proactively. During the first quarter of 2009, 38 percent of 101 new directors were women, according to data compiled by the journal Directors & Boards. That compares to 25 percent for all of 2007 and 2008, and 18.5 percent in 2006, according to the publication.

At Heidrick & Struggles, 19 percent of director placements in the first quarter of 2009 were women, compared to 12 percent in the first quarter of 2008 and 18 percent in 2008 as a whole.

These figures imply that more companies are seeking the fresh perspective that women board members can provide. They are recognizing that the more diversity they have on their board, the more likely directors are to challenge assumptions and bring fresh insights to the company.

We may never know if more diversity in the boardroom would have made a difference to those companies involved in the financial meltdown of 2008. What we do know, however, is that diversity is good for business - statistics show it. Also, companies with diverse boards send a powerful and positive message, both internally and externally, that they are facing the enormous challenges of this economy with broad and fresh perspectives.

[About the Authors: Bonnie Gwin is managing partner of the North America Board of Directors Practice for Heidrick & Struggles. Susan Stautberg is a co-founder of Women Corporate Directors, an international community of women who serve as directors of corporations.]