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Little is to be gained from adding women to the board purely for the sake of fulfilling a quota. That’s not the reason to wait. This is the case for not delaying to add the women who bring unique experiences and qualifications that align with the company’s current needs and, in turn, can enhance the functioning of the board and drive long-term shareholder value.
Value in Diversifying the Board Before Being Pressured to Do So
Adding women to the board voluntarily would keep the company a step ahead from being mandated or otherwise pressured to add one. Institutional investors are increasingly calling for greater diversity in the board room, and social and legislative pressures are mounting to diversify the board. California has recently adopted legislation requiring female directors to be added to the boards of directors of public companies headquartered in California, and similar legislative efforts are ongoing in a number of other states. As one of the latest investor-led initiatives, in October 2019, the New York City comptroller has launched a letter campaign pressuring the S&P 500 companies that have not publicly announced the adoption of such a policy to include female and racially and ethnically diverse candidates in the initial lists of candidates from which new directors (and CEOs) are selected. It is a version of the “Rooney Rule” originally adopted by the NFL. Similarly, the Midwest Investors Diversity Initiative has been working with companies in the Midwest over the past few years to adopt “Rooney Rule” policies.
The board diversity is gradually increasing. As of mid-2019, all S&P 500 companies have at least one female director, and board diversity in Russell 3000 companies is inching forward. Perhaps more significantly, women are increasingly represented in the numbers of new board appointees. Using Equilar’s data, the Wall Street Journal reports that more than 40% of new directors appointed in the first half of 2019 to Russell 3000 boards were women. With the increasing likelihood of facing pressure or being forced to diversify a board, why not do so voluntarily — ahead of the curve — when it could build trust with customers, employees and investors?
Identifying “Right” Female Board Candidates
Undertaking a search process before everyone is scrambling to do the same allows the company to identify the right woman, or women, for its board. Needless to say, not every woman brings the same skills to the table. Staying ahead of the curve allows the company to assess the competencies of the current board and to identify which experiences, skills or networks are lacking or would be desirable to enhance. The board should also evaluate individual director contributions and workload of the board and its committees and then take the time to identify and thoroughly vet female candidates who possess desired skills and experiences and would fill the gaps on the board. To start, do you need a younger voice on the board based on where the company’s market is heading? A more innovative or outspoken one? Are independent directors currently overstretched? Is the company expanding into different markets or facing new regulatory or compliance challenges? Can the board benefit from communication, collaboration or other soft skills in order to function at its highest capacity and in a cohesive fashion?
Limited Downside; Much Greater Upside
Although a woman on the board is unlikely singularly to lead the company to prosperity, she may bring a unique voice to the table that considers different viewpoints, facilitates different board discussions, and potentially results in different decisions and additional opportunities. Admittedly oversimplifying, a female director, particularly with prior human resources experience, may have a different view of the company’s culture and oversight in the #MeToo era. A woman with prior operational or marketing experience may see new opportunities with the company’s customers, even — or perhaps particularly — in the traditionally male-dominated industries. A female director with prior government or academia background may bring a distinctive style to negotiations and M&A. A former female CFO may assess financial risks differently, and a former director with legal or regulatory background may have different views on governance, oversight of compliance issues and related opportunities. A woman on the board has likely faced different challenges and can bring unique perspectives. If added before a mandate — regulatory or otherwise, she is also much more likely to be effective in being heard, valued and trusted by the other board members.
The hesitancy to search for board candidates outside of familiar networks is understandable; yet the downside is limited. In the worst-case scenario, an imperfect woman on the board won’t inflict more damage than an imperfect man. The potential upside of the diverse board is much greater.
Jurgita Ashley is a partner with Thompson Hine LLP and the co-chair of its Public Companies group and can be reached via email. She focuses her practice on SEC compliance, board and corporate governance matters, and shareholder activism. Jurgita is a member of the firm’s Takeovers and Shareholder Activism group, which focuses on representing activist investors in the small cap market and has been listed by Activist Insight Monthly, The Activist Investor, and Thomson Reuters as a leading advisor to activist shareholders. Jurgita is a frequent writer and speaker in the areas of shareholder activism, ESG and gender equality issues. She can be reached via email at or through. The views expressed in this article are attributable to the author and do not necessarily reflect the views of Thompson Hine LLP or its clients.