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'Glacial Pace' of Change Seen for Women on Public Co. Boards

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'Glacial Pace' of Change Seen for Number of Women on Public Co. Boards

ConocoPhillips' decision to hire a female Harvard law professor to its board of directors was sparked by criticism the company received at its May shareholders' meeting on its board's lack of women members.

The lack of diversity on boards of publicly traded companies is not just an issue facing the oil and gas industry, said Laura Hertzog, who teaches classes in the diversity and inclusion program at Cornell University's School of Labor and Relations.

In fact, the vast majority of Fortune 500 companies have boards primarily comprised of white males. While Fortune 100 companies tend to be slightly more diverse, no significant distinction exists between the composition of Fortune 100 boards versus Fortune 500 companies, Hertzog told Rigzone in an interview.

Catalyst, a non-profit research organization that seeks to expand opportunities for women and business, reported in the 2011 Catalyst Census: Fortune 500 Women Board Directors, Executive Officers and Top Earners, that 16.1 percent of corporate board seats for Fortune 500 companies are held by women.

"There has been a glacial pace of change in this percentage," said Debbie Soon, Catalyst's senior vice president of strategy and marketing.

Catalyst has published its census since 1995, when the percent of women corporate directors in Fortune 500 companies wasn't even 10 percent.

Catalyst published its first report on the issue in 2004, "The Bottom Line: Connecting Corporate Performance and Gender Diversity", connecting gender diversity in top leadership ranks to financial performance. The organization has published a number reports examining gender diversity in leadership ranks, especially the boardroom, and the implications for various facets of performance.

A number of initiatives to increase the number of women on public company boards have been launched in recent years, both in the United States and abroad, such as the InterOrganizationalNetwork in the United States, the 30 Percent club in the UK, and Women On Boards in Canada.

Legislative mandates in Norway, Australia and other countries to increase the number of women on public company boards also have been put in place in recent years.

"It's too soon to tell the effectiveness of quotas," said Soon. "It's not likely that the U.S. will adopt a policy of quotas for the boardroom. It has been culturally more acceptable in other countries."

The unintentional consequence of Norway's 40 percent mandate is that they could not find enough qualified women fast enough, Soon noted.

"There seem to be some requests from countries with quotas who are now looking in the U.S. for qualified women candidates."

Significant legal prohibitions against quotas in employment also exist in the United States, said Hertzog.

Why are there fewer women on boards of directors versus men? The issue stems in part from the process for locating and screening candidates for boards of directors position, the number of women in certain industries qualified to serve on boards, and the fact that some companies still don't see the advantage to having women in the boardroom, said Soon.

"Many times the nominating committees look for candidates who are or have been CEOs," said Soon. "Few women have had that responsibility, so the pool is very small. When you add in a specific industry filter to that, such as oil and gas, it becomes a null set pretty fast."

For industries such as oil and gas, where women in leadership are few, the pipeline of women for the boardroom, or women in top operational leadership, is very sparse, Soon commented.

"However, in determining board composition, industry experience in only one of many possible credentials desired in a board member," said Soon. "There are many other competencies that could contribute to a rich dialogue. Looking for a way to be inclusive rather than looking for ways to exclude is a mindset change that has still not occurred in many industries."

Global Recession Brings Scrutiny to Corporate Governance

The global economic recession that began in 2008 has brought scrutiny by shareholders and institutional investors into the governance practices for publicly traded companies, said Charlotte Laurent-Ottomane, the project leader for The 30 Percent Coalition. Increasing diversity of boards in terms of gender, ethnicity, and work experience is seen as one way of enhancing shareholder value and corporate performance.

Founded in November 2011, the organization is seeking to increase the percentage of women holding corporate board seats on publicly traded companies to 30 percent by year-end 2015.

The coalition brings together industry leaders, including senior business executives, statewide elected officials, national women's organizations, institutional investors, corporate governance experts and board members.

In late June, The 30 Percent Coalition sent a letter to 41 companies listed on the S&P 500 Index that do not have any women on their boards of directors urging them to embrace gender diversity by adding women to their boards.

The list of companies that received the letter included Chesapeake Energy – which has faced criticism over the company's governance, among other issues – Urban Outfitters, Expedia, Teradyne and Federated Investors.

"We're not about setting quotas," said Laurent-Ottomane, referencing mandates in Norway and other European countries to require public companies to have a certain percentage of their board members be female.

"We're about collaborating with the companies to make change happen," said Laurent-Ottomane, noting that several companies on the list had reached out to the coalition.

"There are lots of women who want to serve on boards, but work needs to happen to get those women in front of nominating chairs," said Laurent-Ottomane. The process for being selected to a board of directors is a tough process already, but even tougher for women.

"Getting on a board is an art in itself – it's about networking and being in the right place at the right time."

In some cases, playing golf with the boys is one way, Laurent-Ottoman said. When she plays golf with her husband, the women and men typically end up golfing separately, and at these times, the men are off making business deals.

While people have started to think about gender diversity on boards, change won't happen overnight, and in some cases, companies may be reluctant to shake things up. Board members cannot be replaced until their term ends, and adding another person to a board can make it difficult if there are more than 10 people to manage.

The women that are on public companies boards tend to get recycled, with one person serving on multiple boards in some cases.

"If you are already on one board, somebody has already vetted you," said Laurent-Ottomane, making it more likely a candidate will be selected.

The issue of women on boards points to a wider governance issue, Laurent-Ottomane commented.

"If you've got a banking company, you don't need 10 other bankers, you need members with a diversity of work experience."

Boards also need to reflect the market they serve. In some cases, having board members with experience in other industries can increase diversity of thought.

However, adding a woman to a board should not just be done for the sake of having a woman on the board. "It's got to be done in the context of overall governance, and what will add value" to a company.

Click here to read about how lacking diversity in oil and gas management can hinder companies from seeing all risks and vice versa.



Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.

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