Many U.S. boards lack vision, just tick boxes in search for women directors

Fri Mar 20, 2015 12:17pm EDT
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By Nadia Damouni

NEW YORK (Reuters) - Linda Hudson, former CEO of the U.S. arm of British defense company BAE Systems Plc, is among the women that boards call on when they are looking for a female director. In the past two years, she has been approached about 18 times, but the retired executive turns down most of the approaches, she said.

The demand for the 64-year-old Hudson underscores an issue women directors are noticing: companies may be talking about how they want to have more diverse boards but a lot aren't putting in the effort needed to make it happen. This is reflected in the many requests women already on boards get to join more, while those who are qualified but haven’t yet tasted life as a director get none.

"You often don't get the enlightened thinking of reaching beyond the obvious candidates," said Hudson, who sits on the boards of Bank of America Corp and utility Southern Co., and is thinking of joining a third.

The narrowness of the net being thrown may be reflected in the recruitment numbers. Of the 478 new directors appointed to Fortune 500 boards in 2014, only 27 percent were women, according to research firm BoardEx. While those numbers are improving – in 2010 the number was 20 percent – they only represent gradual progress toward parity with men.  

Boards that are slow in adding women may dent shareholders' returns. A 2014 Thomson Reuters study of 1,843 public companies around the world estimated that an index of companies with women directors on average slightly outperformed an index of those with no women directors between 2009-2013, with the difference only becoming clear in the last two of those years.

One reason boards may be slow to add women is that they often restrict their focus to current and former CEOs of big companies. In the Fortune 500, only 25 companies have women CEOs, and given the impenetrable nature of glass ceilings in previous eras there aren’t so many former women CEOs to turn to either.

“The women who fit that criteria are essentially tapped out already,” said Jane Stevenson, vice chairman of board and CEO services at executive search firm Korn Ferry.   Continued...

BAE Systems Inc CEO Linda Hudson smiles during the Reuters Aerospace and Defense Summit in Washington, September 3, 2013.   REUTERS/Jason Reed