Women's propensity to see the bigger picture and for longer term thinking could make them more valuable on boards ill-prepared for activist investors
Rising concerns about activist investor campaigns and other risks are motivating directors to reconsider the kind of talent needed on boards and to take a less tolerant view of members who aren’t delivering value. That’s one finding of a new report based on the 2016 Global Board of Directors Survey, a collaborative effort of professors from Harvard Business School, executive search firm Spencer Stuart, the WomenCorporateDirectors (WCD) Foundation and researcher Deborah Bell. Board diversity in particular is drawing more attention
Based on responses from more than 4,000 male and female directors from 60 countries, the report highlights a disconnect between acknowledgement that attracting and retaining top talent is among the biggest challenges for both public and private company directors and the fairly low ratings that respondents gave their own boards on board diversity, HR/talent management and CEO succession planning.
Cyber-security is among the top three political issues that directors find relevant, along with the economy and the regulatory environment, according to the survey. Women directors show a higher level of concern about various risks their company faces than their male counterparts, and more women (68 percent of respondents) support the use of tools to expedite board turnover, such as term limits and mandatory retirement ages, compared to men (56 percent of respondents).
Key findings from a new governance report released this week by National Association of Corporate Directors (NACD) shed additional light on some of the results of the Global Board of Directors Survey. For example, NACD finds that directors’ comprehension of cyber risk is low, with only 14 percent of 1,034 respondents convinced their boards have a high level of understanding of the risks that stem from inadequate cyber-security, and 31 percent saying they’re either ‘dissatisfied’ or ‘very dissatisfied’ with the quality of information they receive from management on this topic.
‘On cyber-security, it’s not just [about adding] women but you also have to be open to using younger people on the board who really totally understand this,’ says Susan Stautberg, CEO of WCD. ‘It’s some of the younger people who are running these areas and are more alert to what’s going on with some of the cyber-security issues.’ She believes younger people not only tend to have greater interest in technology issues than older people, but that they may be more attuned to where to look for problems that have yet to surface.
The 2015-2016 NACD Public Company Governance Survey also finds that nearly half of boards are unprepared to respond to activist investors, while 46 percent of directors surveyed say their boards have no plan in place to respond to an activist investor’s challenge. Given women directors’ higher level of concern about activism risks, Stautberg believes boards would be better prepared for activists if more women were on boards.
‘I think women want to look long term. They want to respond to various [kinds of] criticism, they want to be prepared,’ she says. ‘And women look at the bigger picture, asking, Are there activists out there? If so, why are they objecting? What can we do to make sure there are enough women on management, make sure we are doing some of the right moves? And they’re usually willing to reach out, not have the clenched fists, but try to talk to the activists and find out what they need and how we can make some of the changes that might be needed.’
As for the reason that the progress on getting more women appointed to boards has been slow, women respondents to the Harvard-Spencer Stuart-WCD survey most often say diversity isn’t a priority in board recruiting, while younger male directors (age 55 and under) attribute it to the fact that traditional networks tend to be male-dominated.
‘This is our fourth survey over about 11 years. The answers are always the same and yet women’s organizations are constantly sending in names of qualified women,’ says Stautberg.
Now that sitting CEOs tend to sit on fewer outside boards, companies have to try harder to find people with the right skill sets, whether it’s manufacturing overseas, emerging markets or digital social media. ‘So the world’s changing, but sadly to say, a lot of the sitting directors’ reactions, which are obviously mostly guys, don’t seem to see that,’ Stautberg says. ‘They’ll answer questions, saying, Yes, we need more digital social media on the board. Yes, we need people with experience in a country [our company] wants to go into, but then they’ll put the same old guys on who they’re buddies with.’
Still, more companies need to continue to consider qualified women for open board seats. Spencer Stuart has helped get more than 1,300 women appointed to major corporate boards because the firm keeps including women candidates on any board slates they recommend. Most search firms are becoming aware of and starting to use the databanks of qualified women that WCD, Catalyst, theBoardlist and other organizations have established because it saves time, Stautberg says.