In the United States, women hold 19.2 percent of S&P board seats, according to the new census by Catalyst, a non-profit group that works to promote women in business and leadership. That's just behind Canada, where 20.8 percent of board seats are held by women, and the United Kingdom's 22.8 percent, but slightly ahead of Germany’s 18.5 percent.
“The numbers are disappointing,” said Catalyst president and CEO Deborah Gillis. “But there is progress. And what does give me optimism is that there’s an increasing global conversation about this issue.”
Still, it’s one thing to converse about getting more women on corporate boards. It’s another thing entirely to actually do it. Some countries, such as Australia, have moved the needle by requiring boards to publicly disclose the diversity of their ranks. In Canada, 27 companies have signed the Catalyst Accord to increase board seats held by women to 25 percent by 2017. Yet while the most successful strategy to date has been setting quotas — Norway and some other European countries have imposed such mandates — they are unlikely to work in the United States, many business leaders say.
So what would?
Several CEOs and board diversity experts say what could actually boost the numbers here is pressure from investors. That's not surprising in a business environment as market driven, and as allergic to regulation, as America's.
"I don't believe shaming anyone makes a difference on this topic," said Maggie Wilderotter, the CEO and chair of Frontier Communications, who is among the five women on her 12-member board. "But I do think a lever that is gaining some momentum is that the investment community — the shareholders — are starting to look at diversity."
Indeed, there's enough interest at both the professional and retail levels of investing that the financial community is now marketing products specifically to investors interested in diversity. Pax World Investments and former Wall Street executive Sallie Krawcheck, for example, are trying to meet that demand by launching an index fund that invests its money in women-led companies. A 2014 survey by the Center for Talent Innovation, a think tank that researches diversity issues, found that 77 percent of the more than 1,700 women queried said they wanted to invest in companies that are diverse at the top.
Meanwhile, large institutional investors such as pension funds are increasingly seeking to fill their portfolios' mandates for socially responsible investments by putting money into companies with diverse boardrooms. Barclays, for instance, has tried to both meet investor demand and apply market pressure to the problem by launching a Women in Leadership exchange-traded note in July, which tracks an index of 85 U.S. companies led by women.
"For public companies, responding to what their shareholders want is a big part of what they have to do," said Sue Meirs, a director of structured funds for Barclays. "This is the first time we've launched a product that had an intended side effect, which is making a positive change."
Though some investors may just want to match their dollars with their values, most hard-nosed investors are surely more lured by the growing body of research that shows the connection between better corporate performance and higher numbers of women at the top. And it's not just Catalyst. Banks to consulting firms to academics have shown that more diversity on a company's board leads to better financial performance (though recent research has shown that, on a global level, that link is dependent on the quality of each country's shareholder protections and the level of gender parity).
Still, investor pressure probably won't work alone. Susan Stautberg, co-founder of a membership group called WomenCorporateDirectors, said upping the number of female directors will take a combination of outspoken CEOs raising the issue's profile, active support for women by executives and board members, and the building-out of resources that help companies identify qualified women directors.
Stautberg also said that if more companies set limits on the length of time directors could serve, it would prompt more turnover and, therefore, bring in more women. "A lot of companies do not have term limits, and a lot of companies have been pushing up the age limit," she said. "They don't want to be in a foxhole with someone new they don't know."
Research from the executive search firm Spencer Stuart shows that just 3 percent of S&P500 boards explicitly specify a term limit for directors. And many boards have increased their mandatory retirement age — 30 percent now set it at 75 or older, up from 24 percent the year before.
James S. Turley is one outspoken former CEO who says more must be done to improve the ranks of women on boards. Turley, the former chief executive of Ernst & Young and a director on several boards, said corporate leaders need to work to improve their own pipelines, and need to recognize that more diversity in the boardroom isn't just good for women and ethnic minorities but for the business itself. Only then will corporate boards in the United States move on from leadership that is “too pale and too male,” he said.
“Well over 75 percent of the customers and employees of almost every company are not heterosexual white men, yet we’re still living in a world where, in most places ... corporate boards have been," he said. "That makes no sense. And it’s not sustainable.”
And yet, like many, Turley doesn't see quotas as the answer. “When a company decides for themselves, when they see [board diversity] as being the best thing for their organization, then they’re going to trust that a lot more than they trust someone else to tell them to do something,” he said.
Turley is an active member of Catalyst's Women on Board initiative, and he's also been a "sponsor" — a concept gaining traction in which senior corporate leaders actively promote and open doors for promising women, rather than just mentor them. Turley served in this capacity for Ellen Costello, a former BMO Financial chief executive who was recently appointed to the board of D+H Corp. Turley made board introductions for Costello and helped her navigate a world that still tends to be rarified and exclusive.
So much so, in fact, that organizations like WomenCorporateDirectors and Catalyst have their own databases of qualified businesswomen, so they can help companies find and elevate more women to their boards. While this may call to mind the ridicule 2012 GOP presidential nominee Mitt Romney faced after saying he asked his staff for "binders full of women," experts on the subject say such lists are necessary. Stautberg said she hears all the time that a company is having trouble finding female directors, and that databases like hers and Catalyst's help introduce women to "guys who may have only known people at their golf club or on the Business Roundtable. Women get handicapped because they haven't always been part of those networks."
Andrea Bierce worked for more than three decades in the consulting and financial industries before being appointed to the board of Cyient, a company headquartered in India, through Catalyst's database, which was launched two years ago. “There is a perception out there that there aren’t women who are good candidates,” she said. “You want to shake them and say, ‘Don’t you know who to call, or Google it for goodness' sake?’”
Whether it means consulting a database or getting more investors to pressure boards to diversify their ranks, Turley says what matters is getting more women in the room. “There are a lot of people around the world that have sort of figured this out — that the board, and therefore the company, makes better decisions when they have a wider array of people sitting around the table making decisions,” he said. “It’s not brain surgery. When you have a lot of different people sitting around the table, you find better solutions."