Men and Women Corporate Directors Remarkably Aligned on Strategy - But Not Diversity
Men and Women Corporate Directors Remarkably Aligned on Strategy - But Not Diversity
New Global Study from Women Corporate Directors, Heidrick & Struggles, Professor Boris Groysberg of the Harvard Business School, and Researcher Deborah Bell Reveals Top Boardroom Challenges, Trends, and Concerns Heading into 2012 Election
In one of the most comprehensive global surveys of corporate board directors to date, men and women directors were found to be in striking alignment on economic outlook, political and regulatory concerns, and the business challenges facing their companies – but differ sharply when it comes to board diversity.
Released today, the 2012 Board of Directors Survey – conducted by WomenCorporateDirectors (WCD), Heidrick & Struggles, Professor Boris Groysberg of the Harvard Business School, and researcher Deborah Bell – captures in extensive detail the governance practices, strategic priorities, and views on their own boards' strengths and weaknesses of more than 1,000 directors from around the world.
At 1pm ET on October 4, WCD, Heidrick & Struggles, and Professor Groysberg will hold a teleconference discussing the full results of the survey.
"We see a remarkable consensus among men and women directors globally regarding the top 2012 political issues and the threat of increased regulation in this turbulent economy," said Susan Stautberg, co-founder and co-chair of WCD. "In fact, diving into the data, there was often greater distinction between U.S. and non-U.S. respondents than between men and women."
"But there is far less agreement from men and women in the area of board diversity. Women believe that board leaders must actively work to bring more women onto boards, while men see the lack of board diversity equally as a pipeline issue," added Ms. Stautberg.
One alarming area of agreement, however, is in how men and women rate their personal strength – or lack thereof – in CEO succession planning. "Astonishingly, only 1% of women and zero percent of men rated succession planning as their strongest area of board expertise," said Bonnie Gwin, vice chairman and co-managing partner of Heidrick & Struggles' North American Board and CEO Practice. "Additionally, although finding the next generation of leadership is critical to the health and prosperity of an organization, only 40% of respondents globally said that their boards had an effective succession planning process for directors."
Researcher Deborah Bell emphasized the wide reach of this year's Board of Directors Survey: "With responses from 1,067 directors from 58 countries, this is the deepest and broadest exploration we have ever done into how boards think and how they operate," she said. "Given the global scale of our findings, the 2012 survey provides a highly in-depth assessment of what matters most to directors who are struggling to right the ship amid a sea of economic chaos."
Key Findings: Politics, Strategy, and Regulation
Top 2012 political issues: state of the economy and federal budget deficit. When asked to name the political issues most relevant to their role as a corporate board director, both men and women cited "unemployment/the economy" and "the federal budget deficit" as the top two concerns. Below these top two, men and women differed slightly, with "healthcare costs" coming in as the #3 concern for women and "energy costs" as #3 for men.
Take-away: "Gender differences practically disappeared when we looked at how men and women directors think about issues like the economy," said Ms. Gwin. "These bottom-line business issues tend to allow for the greatest consensus in the boardroom."
Regulatory pressures and talent issues pose challenges to corporate strategy. The threat of increasing regulations on top of those already levied since the start of the global financial crisis is seen as the biggest obstacle to achieving strategic objectives, according to the survey's U.S. respondents. Both men and women directors cited the "regulatory environment" as the top challenge for their companies, followed closely by the need to "attract and retain top talent." Directors outside the U.S. named regulatory environment and talent concerns equally.
Take-away: "Despite the good intentions behind regulatory reform, board directors do not see increased regulation as the answer to the economic crisis," said Alison Winter, co-founder and co-chair of WCD. "Men and women directors are similarly concerned about the ability of Dodd-Frank to create better corporate governance – only about a quarter of both men and women respondents agreed that these regulations would result in better corporate governance."
Professor Groysberg underscored the importance of talent management to companies' long-term strategic goals: "Given that for many companies human assets are a major source of competitive advantage and given the very large differences in performance between the top people and everybody else, it is becoming increasingly critical for boards to be involved in talent management to assure that their companies' most important assets and competitive advantage are not being mismanaged."
Key Findings: Diversity and Governance
Diversity on boards: a pull from above or a push from below? When asked to rank the most effective ways to build diverse corporate boards, women directors cited "board leadership serving as champions of board diversity" as the #1 factor. Men in the survey ranked this equally with "developing a pipeline through director advocacy, mentorship, and training."
Take-away: "Women tend to put the responsibility squarely on board leadership, while men see it as both a pipeline and a leadership issue," said Henrietta Holsman Fore, co-chair of WCD. "Women view the board chairs, lead directors, and nominating committee chairs as the real change agents in building a diverse boardroom."
"Boards continue to struggle with diversity and our year-to-year findings have, unfortunately, not shown boards making progress in this area," said Ms. Bell. "In 2012, we found that 46% of U.S. directors and 57% of directors outside the U.S. could not say that seating a diverse representation on the board was a priority for their boards, and less than half (47% of U.S. and 35% of non-U.S.) could say their boards had adopted measures that successfully advanced diversity on the board. The percentages for 2011 were almost identical."
Disagreement on reason why women are underrepresented on boards. Forty-five percent (45%) of men vs. 18% of women surveyed believed that the "lack of women in executive ranks" is the primary reason that the percentage of women on boards isn't increasing. As the top reason why there were not more women on boards, women respondents cited that "traditional networks tend to be male-oriented."
Take-away: "There is a clear perception gap when it comes to evaluating how the still predominantly male business networks impact the number of women on boards," said Ms. Stautberg. "Women see a real need to develop the kinds of networks that have historically been the path to directorships. These more diverse networks will create greater success for the company."
"On many boards, creating an inclusive culture for the organization has not been a point of focus," said Professor Groysberg. "The increased importance of diversity to organizational success, however, is compelling boards to make it part of their strategic focus. Unfortunately, many boards lack awareness of best practices in this area and are uncertain about how to integrate diversity and inclusiveness initiatives into their organization's long-term strategy."
Quotas: still causing a somewhat divided boardroom. Just over half the women directors surveyed (51%) believe that quotas are an effective tool for increasing diversity in the boardroom, but only 25% of men agreed. There is a relatively higher belief in the efficacy of quotas among directors outside the U.S. (38%) – versus 30% of directors in the U.S., combining men and women.
The pattern repeated when directors were asked whether they personally supported boardroom quotas. Thirty-nine percent of women and just 18% of men do support them. Outside the U.S., 28% of directors support quotas, while only 22% of U.S. directors do.
Take-away: "Board quotas remain an evergreen topic, as some countries seek to legislate diversity," said Ms. Gwin. "However, we see from these numbers that quotas don't garner an overwhelming support even from women directors."
"Greater regulation in general – whether involving governance decisions, financial disclosures or diversity quotas – are just not that popular with boards," agreed Ms. Stautberg. "Directors are well aware of the challenges they face in steering their companies into recovery, but they do not see regulation as the solution."
Other noteworthy topics in the 2012 Board of Directors Survey include:
Skills gaps on boards – including technology expertise and talent management
Importance of social media, "the cloud," and other technologies to boards
Difference in prioritizing energy costs and environmental sustainability in U.S. vs. non-U.S. directors
Views on board term limits
Lack of tracking to measure effectiveness of board decisions
Insufficient time during board meetings to discuss strategy
Inadequate training for new members and lack of means to address poorly performing directors