Friday, February 08, 2008
Corporate Board Effectiveness
The Center for Effective Organizations at the University of Southern California’s Marshall School of Business surveyed 768 corporate directors at 660 of the 2,000 largest public traded firms in the US for their 10th Annual Corporate Board Effectiveness survey (in collaboration with the executive search firm, Heidrick & Struggles).
Heidrick & Struggles Board Effectiveness Study with USC Center for Effective Organizations
What are the lessons from this survey for women who aspire to corporate board of director positions at large publicly traded companies? First, some perspective on the sample: about 1/3rd of the top firms responded to the survey, and the sample represented about 1.2 boards per person.
Forty percent (40%) of the boards surveyed say that today they limit the number of boards on which outside directors can serve. In 2001, only 3% of respondents limited their fellow board members from becoming “serial directors.” That is good news for aspiring women because they no longer have to compete with men AND with the few women who were professional directors. Generally, it compels boards to reach deeper into the talent pool of prospective candidates.
Fifty-four percent (54%) of boards limit the number of boards on which their CEO can serve. In 2001, only 23% limited the number of concurrent seats on which a CEO could serve. Again, this is good news to the extent that boards have to look farther and wider for competent CFO, CIO, CTO, and GC level talent. This is not as good news for women who finally made it to the CEO level to be told they can sit on only a limited number of seats, but we suspect that good CEOs of both genders benefit from the opportunity to focus on their jobs. The message is mixed for women at the Cxx level since they just finished competing to get to that level and now every male peer there also would be competing with the women for board seats.
The study concludes that the practice of placing limits on multiple boards seats is “a contributing factor in the ongoing difficulty to recruit qualified directors.”
The greatest share of respondents (74%) were outside directors. And the respondents serve on an average of between 2 and three boards, themselves (2.5 board seats each).
Finding “qualified directors” is a challenge faced by all public company boards. Many companies have opted to reduce the size of their board rather than bring into the boardroom someone whom they believe is not qualified, not independent, does not have prior board experience or does not have domain experience in the strategic area the board considers the “gap” to be filled.
Some women argue “there are more than enough women candidates” from the C-levels of corporate America to meet the demand. Often, women director advocates argue that corporations are the ones “not doing enough” to bring more women into the boardroom of public companies. Their arguments focus on that half of the marketplace over which women have the least amount of control or influence: trying to change what goes on in the boardroom. They attempt to “persuade” or “embarrass” corporate directors into adding women to boards.
Corporate executives have only indirect influence on the boardroom. C-level managers make financial, risk, compensation, investment or strategic presentations and recommendations to board members. They do not dictate to boards. Directors are not responsible to C-level managers or even the CEO. Directors are responsible for oversight and governance of management in the best interests of shareholders and, to a lesser extent, the stakeholders.
We keep hearing that “THEY [men] won’t bring women on their boards. THEY [men] won’t give women more small business contracts. THEY [men] won’t hire more women on their investment firms.”
When is it going to be time for women to stop consuming and shopping and start investing? If women “control” such significant shares of the marketplace, why don’t they make their financial voices heard? Just a little withholding of one market commodity got Lysistrata a lot of attention. Can you imagine the possible impact of a little withholding of expenditures at Wal-Mart, McDonalds, or even investment funds?
There is a real shortage in the supply of experienced, qualified women directors. When the number of seats held by women directors average between 3 and 4 boards, or more, economists call that “doubling up.” Demand is exceeding supply. In such cases, boards are using other boards to “certify” that a woman director is qualified rather than go out on their own to search and find women executive candidates who might be untested as a director. Experience in top management, even as someone who successfully represents the CEO’s financial or legal message to the board of directors, does not translate into affirmative evidence that a candidate can be financially independent, analytic or objective. It does not prove that a candidate has the sound collaborative skills required to debate and deliberated in the committee arena.
“Can she meet the challenge?” always is the search committee’s most pressing question. When one board hires a woman director, that question is answered in the affirmative for other boards and that is one reason that might explain why talented women directors hold more seats. When boards say “they cannot find qualified women directors” they mean they have not yet found a woman about whom they can confidently answer the above question, “Yes, she most assuredly can.”
Heidrick & Struggles Board Effectiveness Study with USC Center for Effective Organizations
What are the lessons from this survey for women who aspire to corporate board of director positions at large publicly traded companies? First, some perspective on the sample: about 1/3rd of the top firms responded to the survey, and the sample represented about 1.2 boards per person.
Forty percent (40%) of the boards surveyed say that today they limit the number of boards on which outside directors can serve. In 2001, only 3% of respondents limited their fellow board members from becoming “serial directors.” That is good news for aspiring women because they no longer have to compete with men AND with the few women who were professional directors. Generally, it compels boards to reach deeper into the talent pool of prospective candidates.
Fifty-four percent (54%) of boards limit the number of boards on which their CEO can serve. In 2001, only 23% limited the number of concurrent seats on which a CEO could serve. Again, this is good news to the extent that boards have to look farther and wider for competent CFO, CIO, CTO, and GC level talent. This is not as good news for women who finally made it to the CEO level to be told they can sit on only a limited number of seats, but we suspect that good CEOs of both genders benefit from the opportunity to focus on their jobs. The message is mixed for women at the Cxx level since they just finished competing to get to that level and now every male peer there also would be competing with the women for board seats.
The study concludes that the practice of placing limits on multiple boards seats is “a contributing factor in the ongoing difficulty to recruit qualified directors.”
The greatest share of respondents (74%) were outside directors. And the respondents serve on an average of between 2 and three boards, themselves (2.5 board seats each).
Finding “qualified directors” is a challenge faced by all public company boards. Many companies have opted to reduce the size of their board rather than bring into the boardroom someone whom they believe is not qualified, not independent, does not have prior board experience or does not have domain experience in the strategic area the board considers the “gap” to be filled.
Some women argue “there are more than enough women candidates” from the C-levels of corporate America to meet the demand. Often, women director advocates argue that corporations are the ones “not doing enough” to bring more women into the boardroom of public companies. Their arguments focus on that half of the marketplace over which women have the least amount of control or influence: trying to change what goes on in the boardroom. They attempt to “persuade” or “embarrass” corporate directors into adding women to boards.
Corporate executives have only indirect influence on the boardroom. C-level managers make financial, risk, compensation, investment or strategic presentations and recommendations to board members. They do not dictate to boards. Directors are not responsible to C-level managers or even the CEO. Directors are responsible for oversight and governance of management in the best interests of shareholders and, to a lesser extent, the stakeholders.
We keep hearing that “THEY [men] won’t bring women on their boards. THEY [men] won’t give women more small business contracts. THEY [men] won’t hire more women on their investment firms.”
When is it going to be time for women to stop consuming and shopping and start investing? If women “control” such significant shares of the marketplace, why don’t they make their financial voices heard? Just a little withholding of one market commodity got Lysistrata a lot of attention. Can you imagine the possible impact of a little withholding of expenditures at Wal-Mart, McDonalds, or even investment funds?
There is a real shortage in the supply of experienced, qualified women directors. When the number of seats held by women directors average between 3 and 4 boards, or more, economists call that “doubling up.” Demand is exceeding supply. In such cases, boards are using other boards to “certify” that a woman director is qualified rather than go out on their own to search and find women executive candidates who might be untested as a director. Experience in top management, even as someone who successfully represents the CEO’s financial or legal message to the board of directors, does not translate into affirmative evidence that a candidate can be financially independent, analytic or objective. It does not prove that a candidate has the sound collaborative skills required to debate and deliberated in the committee arena.
“Can she meet the challenge?” always is the search committee’s most pressing question. When one board hires a woman director, that question is answered in the affirmative for other boards and that is one reason that might explain why talented women directors hold more seats. When boards say “they cannot find qualified women directors” they mean they have not yet found a woman about whom they can confidently answer the above question, “Yes, she most assuredly can.”
# posted by ChampionBoards.com @ 5:11 PM 
