Women in the boardroom

Recently, Sheila Scarborough of Tourism Currents shared a TechCrunch post with her Facebook friends. The post, written by Aileen Lee, was entitled "Why Your Next Board Member Should Be A Woman." According to Lee:

While women comprise 51% of the population, they make up only 15.7% of Fortune 500 boards of directors, less than 10% of California tech company boards, and 9.1% of Silicon Valley boards.

Inasmuch as I work for a subsidiary of a French company, I was curious about the situation in Europe. According to the European Professional Women's Network, the percentage is similarly low:

Women make up 11.7% of boards at the top 3001 European companies up from 9.7% in 2008 and 8.5% in 2006, the best progress since first BoardMonitor. Of a total 4,875 board seats, women occupy 571. As a result of quota legislation2 Norway remains at the top of the table in having 37.9% women on boards. Portugal, Italy, Greece, Spain, Belgium and France have more than doubled the number of women on boards; the introduction of Corporate Governance Codes together with equal access legislations currently under discussion in a few countries is having a significant impact, as well as increased shareholder and media scrutiny of board membership.

But what happened in Norway? The Glass Hammer looked at the results, and then analyzed them:

Dittmar and her colleague Kenneth Ahern studied what happened after Norway required public-limited firms to have at least 40% of board seats filled by women in 2003. Voluntary compliance in the country failed, so the law made it compulsory in 2006, with a two year transition period. “Boards are chosen in order to increase shareholder wealth,” says Dittmar. “Placing restrictions on the composition of a board will reduce value.”

Dittmar and Ahern’s study found that when a board had a 10% increase in the number of women, the value of the company dropped. The bigger the change to the structure of the board, the bigger the fall in returns.

Why? One possibility was that the women recruited pre-quota were more experienced than the women who were recruited post-quota.

When firms were free to choose directors before the rule, they tended to choose women that were similar to men directors. This is consistent with the idea that the large demand and small supply for women directors after the adoption of the 40-percent quota forced firms to choose directors that they would not have chosen otherwise.

This, of course, assumes that companies are choosing qualified people for their boards of directors. Remember Michael Eisner?

Eisner is the prototypical candidate for CEO disease. He is notorious for filling Disney's board of directors with cronies and others who would be unlikely to be very critical of his decision-making and performance.

The Economist recently provided examples:

Back then, Disney’s board might easily have been mistaken for a pair of Snow White’s dwarf pals (specifically, Sleepy and Dopey). At one point, its directors included an architect friend of Mr Eisner and a local schoolteacher. This made it a target of shareholder activists who, after a series of corporate scandals at other firms with insufficiently accountable bosses, campaigned for big changes in how all American firms were governed.

Eisner defended his choices in 1997:

"I would not suggest this board for a U.S. Steel, but if you are building theme parks, creating Broadway shows, and educating children, wouldn't you want a priest, a teacher, an architect, and an actor on your board?"

No, because this sounds like a cast of characters that you'd see walking into a bar, and Disneyland doesn't serve alcohol.

As for the schoolteacher, Reveta Bowers, she doesn't even list her tenure on Disney's board on her LinkedIn public profile. It does not appear that any other Fortune 500 company has been demanding that she serve on THEIR board.

Obviously there have been qualified women on company Boards of Directors, and the TechCrunch post suggests that there are others who are equally qualified to serve. The less-than-qualified women (and men) can turn up in any era, quotas or no.