Men Join Corporate Boards With Less Experience Than Women Do
(Bloomberg) -- More than three out of four new male company directors are rookies, appointed without any prior corporate board experience, according to a new study of the world’s biggest publicly traded companies.
First-time female board members are less common. When a woman fills a board seat, there’s a 32 percent chance she’s already served as a director at another company, the study found. When a man does, there’s a 23 percent chance he’s already held a seat. The gap suggests that women disproportionately face the old Catch-22: To get chosen to be on a board, they already have to be on a board.
The problem, says John Roe, managing director of ISS Analytics, which conducted the study of 105,000 directorships, is that most board members get hired on the recommendation of existing directors, who are mostly male and whose networks tend to consist of people who look like themselves. A PwC study last year found that 87 percent of boards relied on member recommendations, contributing to what it called the "same old, same old" effect.
In Australia, the U.K., and Sweden, the experience gap is wider than the average, ISS found. Roughly half of new female directors in those countries are coming in with board experience, compared with about one-third of men. Only in one country -- France -- are men more likely than women to already sit on a board.
One consequence of this phenomenon is that some women end up on more than half a dozen boards at any one time. In the U.S., Ann Mather, a former Pixar executive, is a director of Alphabet Inc., Arista Networks, Netflix, MGM Holdings, Shutterfly and a handful of others. Hong Kong-based Maria Wai Chu Tam is listed as a board member of more than 12 companies. France’s Delphine Arnault, an executive of LVMH and daughter of founder Bernard Arnault, is a director of Havas, Groupe M6, Twenty-First Century Fox, Ferrari and Christian Dior, in addition to the luxury goods conglomerate.
While that means a company is getting an experienced director, it may also mean the company is not getting the specific skills it needs for that position, Roe said.
"You are putting blinders on in your search for talent," he said, noting that effective directors may put in 300 hours a year. "Are you going to get the director’s full attention?"
Overall, women hold almost 30 percent of board seats in the FTSE 100 companies and Sydney ASX 100, with the Canadian TSX60 not far behind, ISS data shows. They make up 22 percent of board seats in the S&P 500, up from 19 percent in 2014.
The best way to increase women’s representation is to find new sources of qualified women who may not have the same C-suite background as existing directors, said ISS Analytics, a unit of the Rockville, Maryland-based proxy voting firm Institutional Shareholder Services.
One route for women to join boards is when they work for a company’s outside auditor, Roe said, experience which could explain why female directors often sit on audit committees. Rules on executive pay in the U.K., Australia and the U.S. also mean that the compensation committee is more regimented and gets significant outside support, which may make it a more appropriate role for a less experienced board member, Roe said.