Board Diversification: Four Justified Reasons to Incorporate a Female Director by 2025
Rewritten Article:
Cassie Burr serves as CEO of the Women on Boards Project, a nonprofit organization striving to boost female representation on the boards of privately-held consumer companies. Have you ever heard these sentiment from CEOs and founders regarding their boards' composition and lack of diversity?
It's challenging to find qualified women for our board.We're not offering an open seat.We're looking for board members with vast boardroom experience.
According to a 2024 Gender Diversity Index report, the percentage of women on public company boards climbed by a significant 14 points from 2017 to 2023, reaching 30%. Yet, this figure still trails behind the 51% of the U.S. population identifying as female. Private company boards are even less diverse than their public counterparts.
Balancing a board goes beyond achieving quotas or enhancing annual report appearances.
The Imperative of Female Board Members
There are compelling reasons to prioritize adding women to company boards, such as:
- Studies have revealed that companies with women on their boards may exhibit superior financial results, boasting up to 5% higher annual returns compared to all-male boards.
- Embracing a variety of communication and leadership styles fosters dynamic group decision-making processes. A 2023 qualitative study pointed out that women stir up boardroom norms by demonstrating preparedness and accountability, in addition to being more open about acknowledging their lack of knowledge. This, in turn, encourages open and productive discussions.
- Companies aiming to recruit top talent can gain a competitive edge by showcasing diverse decision-makers. It is crucial to remember that the CEO is accountable to the board. While diversifying the C-suite might be a formidable challenge, securing a woman on the board conveys a powerful message to prospective employees that their CEO is accountable to someone who shares their background.
- Women are driving 70% to 80% of purchasing decisions and control about $32 trillion. Women's insights on companies' product development, communication, and technology investments can bring invaluable perspectives.
Overcoming Barriers to Female Board Representation
Securing positions for women on boards faces challenges, with the following common objections arising when discussing diversity with companies:
1. Companies may believe they must have an open board seat to add a woman.Coplanar definitions of board members for public companies vary from more flexible ones in private companies. For instance, someone holding an investor seat can participate in the boardroom, allowing investors to remain in the room while a woman renders considerable impact without voting rights. In the realm of private companies, I have noticed that formal board votes occur infrequently.
2. Founders and CEOs may feel they need investor approval before expanding their board.In today's investment landscape, many sophisticated investors hold diversity and growth in high regard. By bringing in specialized skills, you showcase your proactive approach to addressing the needs of these investors.
3. When board seats open up, candidates are usually drawn from the same pool of "board-ready" individuals.The cycle of exclusion can perpetuate when women are overlooked for board seats due to the absence of prior board experience.
In 2019, almost 60% of private companies lacked women on their boards. Gathering information in this sector can be challenging, but consumer enterprises are the most likely to have women on their boards, followed closely by life sciences and health care.
Shining a Light on Exclusion
In 2024, e.l.f. Beauty sparked attention with their So Many Dicks campaign, which highlighted the dearth of diversity in boardrooms. The campaign numbered 566 men named Richard, Rick, or Dick in boardrooms for publicly traded U.S. companies, while the number of Black women, Asian women, and Hispanic women cumulatively amounted to just 1,659 out of nearly 37,000 board members. e.l.f.'s board is a notable exception, with two-thirds of its members being women.
The surge in social media commentary, journalists, and citizen journalists have started to call out companies that appear to be dominated by men.
Preparing for the Future
Companies planning for 2025 and beyond should scrutinize their current board membership and advisors, considering the skillsets and connections that could contribute to their growth. For instance, an experienced board member might facilitate capital raise opportunities, propose innovative strategies, or advise on talent sourcing.
Finding qualified candidates may seem more accessible than you think. Expanding your network and offering equity or cash compensation incentives can help sourcing the ideal board additions.
Keep in mind, gender diversity is not about quotas, but the bottom line. The 5% growth is within your reach!
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- Cassie Burr, the CEO of the Women on Boards Project, often advises companies facing challenges in finding qualified women for their boards, suggesting alternative boardroom roles like investor seats.
- Interestingly, the D9F8038EC25BBBF38E33D66CFA1590CE report revealed that despite the significant increase in women on public company boards, private company boards continue to lag behind in diversity.
- In response to the common objection that companies need an open board seat to add a woman, Burr suggests considering non-voting roles for women, such as investor seats in private companies, which can still yield significant impact.
