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How To Change The Ratio Of Women On Boards

Three ways to re-examine and recruit more female board members by the end of 2015.

How To Change The Ratio Of Women On Boards

Does gender really matter when you’re in a leadership position?

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Not as much as you might think.

A new study from the Pew Research Center found that honesty, intelligence, and decisiveness are believed to be the most essential leadership traits, according to 80% of adults. Both men and women agree. Large swaths of both genders say that innovation and intelligence is in evidence in both men and women. As for honesty, ambition, and decisiveness –there’s no gender distinction there, either.

If that is the case, there’s even less of a reason for the disparity of female board members at public companies in the U.S. According to a new study from nonprofit research organization Catalyst, the U.S. has 19.2% of board seats at S&P 500 companies, lagging behind Norway, Finland, France and Sweden, each around 30%.

Statistics like these had Solange Charas, puzzled and frustrated. Before she started her own consulting firm, Charas spent more than 20 years in c-suites and a variety of company boards including heading up human resources at Praetorian Financial Group and EURO RSCG, a national director at Arthur Anderson, a leader of the international compensation team at Towers Perrin, and worked with the board of directors of Martha Stewart’s company (pre-IPO).

With this front row seat, Charas says, “The differences between high and low performing teams are pretty clear when you see how they interact, the way they make decisions, and the outcomes.” The impact of a dysfunctional group was felt all the way to the bottom line, she observed.

Despite the clarity, Charas admits when a board was dysfunctional, “I couldn’t understand how to effect a positive change,” she says.

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Charas decided the best way to solve the problem was further study. So she earned a Ph.D. in order to do more extensive research into the reasons why some boards soared while others flailed, and more importantly, how to replicate the creation of successful teams at any company, and effect its financial performance for the better.

The Diversity Difference

In the course of her research and her observations within companies, Charas found that diversity was key to having a high performing team. “There is a lot of empirical evidence that boards that have women outperformed [those that were all male],” she adds, because the addition of women adds to the group’s collective intelligence as well as social sensitivity.

Her own research culled from responses of more than 1,000 board and C-suite executives suggests that a team’s collective intelligence, which Charas calls TQ can increase the company’s bottom line performance.

So what is standing in the way of adding more women to boards and executive suites? “Change is a slow process,” Charas contends, “We need to change the mindset of the boys’ club.”

Which won’t be easy she cautions. “Research shows that women tend to pursue ideas that they believe are in best interest of shareholders even under pressure of other board members,” she points out. For men, even as high up the chain as Warren Buffett, “Collegiality trumped. Men think more about not making waves,” Charas argues.

That has to change for boards to become higher performing and contribute to corporate profitability, she says.

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How Change Will Happen

With no diversity quotas in place for legislative boards in the U.S. (voluntary boards must meet 20% of the underrepresented gender by 2020) other measures must be taken, Charas says.

That’s one reason she joined the Thirty Percent Coalition, an organization committed helping women hold 30% of board seats across public companies by the end of this year.

Charas says there are plenty of organizations that help women ready themselves to take a board seat –creating a supply of seasoned executives who will be able to step into those roles with ease. However, the Thirty Percent Coalition works to drive the pace of change from the other side of the equation by creating demand for those seats. To do this, senior business executives, national women’s organizations, institutional investors, corporate governance experts and the public sector work to influence corporations to strengthen their efforts to increase the number of women on their boards.

For example, investors can rally the boards of the companies they invest in through a lobbying effort, Charas explains, that boils down to this: “we want to see this because we know relationship between women and higher bottom line.”

Charas also points out that teams at public companies need to be more reflective of its consumer base. She cites statistics of the buying power of female shoppers and many studies show that women control up to .

Some industries are taking matters into their hands. The Outdoor Industries Women’s Coalition (OIWC) announced that the CEOs of REI, The North Face, Patagonia, and ten others signed a pledge to accelerate women’s leadership in their companies. This initiative should drive measurable change in an industry that accounts for 6.1 million U.S. jobs.
 
The REI Foundation is also awarding a grant of $1.5 million to the OIWC to support a major initiative that will build programs and services for the industry to better serve female leaders, offer matching funding for companies that support the OIWC, and create new opportunities for entrepreneurial women through advisory and mentoring programs.

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Laura Swapp, REI’s director, Brand Partnerships and Multicultural Marketing and a vice president of the REI Foundation, tells Fast Company, “The evidence shows that balanced representation in executive ranks and on boards is correlated to stronger financial performance. So it is deliberate that our board is 40% women.”

Swapp notes that while REI is a co-op that is committed to representing all 5 million of its members’ interests, leadership statistics in the industry don’t reflect such diversity. “We think of the “need” in terms of an ecosystem which includes mentoring emerging women entrepreneurs, surfacing disruptive innovative ideas and increasing executive representation at the most senior levels. Boards are a big part of that picture.”

Charas says to achieve this, executives need to also rethink their recruiting strategy. With her extensive experience in HR, Charas contends that while it’s smart to hire people based on a cultural fit with the company, “we like to hire people who look like us and we sacrifice diversity for homogeneity.”

By not defaulting to friends and close associates, existing board members can inject a new dynamism by bringing in “strangers.” Charas says they should be screened for skill and motivation, but the new perspective tends to generate higher levels of governance quality.

Diversity generates new ideas, creativity and innovative, she says, but it’s important to find the balance between people who are disruptive and those who simply bring a different point of view. “You do want people who are going to embrace your beliefs,” she maintains, “Successful organizations are populated with those who go above and beyond because they like and believe in the company.” Regardless of gender.

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About the author

Lydia Dishman is a reporter writing about the intersection of tech, leadership, and innovation. She is a regular contributor to Fast Company and has written for CBS Moneywatch, Fortune, The Guardian, Popular Science, and the New York Times, among others.

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