New Zealand Census of Women's Participation 2006 page 3
Building Better Boards
“Smart business people know that every inefficiency is also an opportunity”
Thomas A. Stewart, Editor, Harvard Business Review.
Countries that do not capitalise on the full potential of half of their societies are misallocating their human resources and undermining their competitive potential, according to the World Economic Forum (Lopez-Claros & Zahidi, 2004-05). New Zealand is one of those countries. The rise of women in employment is one of New Zealand’s most dramatic labour market trends, but this participation is not reflected at the top in corporate company boardrooms.
The Census is a systematic attempt to make transparent the current status of New Zealand women on boards in the public and private sectors and in other areas of professional and public life. It is a timely reminder for companies wanting to exploit the opportunity to appoint women, not out of a sense of tokenism, but because it is good for business. The Economist (July 23, 2005) reports that research from America, the United Kingdom and Scandinavia shows a strong correlation between shareholder returns and the proportion of women in the higher executive echelons. “While this does not establish a causal relationship, it does suggest that a corporate culture which fosters women’s careers can also foster profitability” (p.12).
Stocktakes of the progress of women on corporate boards in the United States, Canada, the United Kingdom, Australia, South Africa and European countries are regularly published. Researchers at the Cranfield School of Management in the United Kingdom state that the results of regular benchmarking are being used as evidence of the need for change. Policy-makers are starting to query why there is a lack of women in decision-making roles (Singh & Vinnicombe, 2005). But the way in which action is taken differs from country to country.
A range of strategies, activities and interventions employed overseas to boost the gender balance of corporate boards are reported here for debate and consideration in the New Zealand context.
Boards of directors
Visibility and transparency of appointments to boards
A high level of informality surrounds the process of board appointment for many New Zealand companies. One of two recent reports on corporate governance in the United Kingdom states that “a rigorous, fair and open appointments process is essential to promote meritocracy in the boardroom” (Higgs, 2003, pp 39-40). The second report underlined the risks involved in relying on personal contacts as the sole source of candidates (Tyson, 2003).
A best practice checklist for new appointments promoted in the United Kingdom (Department of Trade and Industry, 2004) includes the following:
1. What’s the business requirement going forward?
2. What skills, knowledge, experience are we looking for or feel we are missing?
3. What’s the overall balance of the board in terms of age, profile, gender and geographical spread?
4. How does any new appointment relate to longer term succession planning?
5. What’s the availability of people with the skill-sets, experience and market credibility we need?
6. Select the best available candidate.
Advertising for the widest range of suitable candidates would remove the dangers of informality and improve the narrow focus that interlocking directorships may bring to corporate strategic vision. Board head hunters and search companies should have transparent equity practices and chairs should be actively involved in nominations, selection and appointment processes.
Developing the talent pool
a) Finding the talent
Successive New Zealand governments have led by example in setting the standard for more effective and diverse boards through the public appointments system. The nominations services developed by public agencies aimed at improving the strength and diversity of statutory boards could be made available for use by the private sector searching for new board talent. For example, the Ministry of Women’s Affairs Nominations Service is a governance recruitment service for the public sector and holds the relevant information of over 2500 women. The database is used by the Ministry to search for candidates on the basis of governance experience, work experience, skill set, areas of interest, academic qualifications, expertise and geographical location. The Ministry should be adequately resourced so it can open the service to the private sector (on a user pays basis if need be). This would complement other nominations services available and remove any remaining stereotypical perceptions that high quality female candidates are not available.
b) Developing talent
The acquisition of basic directorship skills including knowledge of directors’ duties, liabilities, legal responsibilities and finance is part of the core business of organisations such as the Institute of Directors (IOD). With its 3,800 members, membership of the IOD is open to both aspiring and existing directors and it recently launched a Director Accreditation Programme which aims to allow accredited members to commit to professional standards and to provide shareholders with reassurance. It is too early to say whether the accreditation programme, which promotes a hierarchy of accreditation based partly on experience, will influence the progress of women on boards. Over the past five years, 2001-2005, there have been 24 Distinguished Fellows of the Institute, all of them men. The Institute had two females on its 10 member council in 2005.
Crown companies and other public sector boards show that there is a pool of skilled and talented women with governance experience in both the business and non-business worlds in New Zealand, who are overlooked by the top 100 companies for board appointment. The attributes and expertise of female directors in state-owned enterprises and in crown companies can be highly relevant to the corporate sector. The voluntary sector, too, has leaders who daily manage and govern large and complex organisations that face the same challenges as companies. Leaders in not-for-profit organisations often have specialist or technical skills and expertise in dealing with diverse stakeholders and sensitive political issues both nationally and internationally.
c) Mentoring and networking schemes
A growing number of schemes and initiatives involving mentoring and networking to help women unlock boardroom doors are available here and overseas. Two of the more innovative involve cross-company mentoring and consultancy work with male-only boards. In the United Kingdom more than 20 FTSE 100 Chairmen or CEOs have committed to act as mentors to women who have been identified by their peers as potential directors. The unique, cross-company mentoring scheme is aimed at developing women in the “marzipan” layer, high performers just below board level. It is sponsored by the Change Partnership which has as one of its members a consortium, Women Directors on Boards (Department of Trade and Industry, 2004).
In the United States, Susan Adams and Patricia Flynn (2005) report on a promising intervention strategy springing up to promote women on corporate boards. The Boston Club is one of a number of organisations acting in a consulting capacity to organisations wishing to increase the number of women on their boards. The Club also actively solicits a consulting relationship with companies with a poor representation of women directors. Adams and Flynn say there is a need for such groups to understand and address the specific business goals of the companies they work with. Companies are more likely to take positive steps if other similar companies are doing so too.
Shareholder activity
Telecom, New Zealand’s largest company on the NZX by market capitalisation, currently has two female directors on the board and is a leader in gender representation. It wasn’t always the case. Less than a decade ago, Telecom was in the firing line from shareholders for its lack of gender diversity. A former chairman publicly stated that “good women were hard to find.”
Institutional investors and individual shareholders can be catalysts for change and the lack of diversity of board representation has been questioned by small shareholders’ associations, institutional investors and individual shareholders. Over half, 63 percent of the top NZSX 100 companies in New Zealand have no women on their boards according to the Census results. Lack of female representation in the boardroom occurs, for example, in well-known companies that specifically use women in their advertising and as a target market for service and sales. The substantial under-representation of women on New Zealand company boards may be challenged at annual meetings and in other ways by shareholders concerned about added value and corporate health.
The following proposals outline an agenda for change to promote gender balance in governance, professional and public life:
> The Government and responsible ministers ensure that progress towards gender parity on public sector boards covers economic and commercial activities and major public utilities as well as social and community life and smaller statutory boards.
> Shareholders’ groups, institutional investors and individual shareholders ask chairs of boards at annual meetings, in discussion and in correspondence, about the representation of women on boards of directors.
> Publicly listed companies advertise board vacancies and vet search processes to encourage and ensure diversity of potential directors.
> Adequate resources are made available to the Ministry of Women’s Affairs Nominations Service to allow its use by private sector companies interested in women appointments to boards of directors.
> Women as well as men are selected as Distinguished Fellows of the Institute of Directors to recognise current female governance leadership. Monitoring of the gender consequences of the Director Accreditation Programme will be an important future equity consideration.
> The New Zealand Vice-Chancellors’ Committee provides leadership in gender progress in universities through public commitment and through encouragement of consistent EEO reporting by its members. An assessment of the Australian Vice-Chancellors’ Committee Action Plan for Women by the NZVCC.
> Women members of the New Zealand Law Society ask their professional body for information about how it ensures women members enjoy equal opportunities in their profession.
> Best practice guidelines from law firms who have increased female partner numbers are developed and promoted to others in the legal profession.
> The Ministry of Justice considers the issue of female eligibility for judicial appointments, given the emphasis on gender balance in the judiciary in the Beijing Platform for Action.
> Gender progress in the media is regularly monitored through the New Zealand Journalists Training organisation survey, as a catalyst for improving women’s senior editorial status.
> The New Zealand Census of Women’s Participation 2006 is communicated widely to business, industry, the community and men’s and women’s groups by the Human Rights Commission and the New Zealand Centre for Women and Leadership.
> The media use the New Zealand Census of Women’s Participation 2006 as a factual reference to report on women’s full and equal participation in governance and public life.
> Women with relevant leadership experience and skills who are interested in board appointments register their CVs with the Ministry of Women’s Affairs Nominations Service and/or the Crown Company Monitoring Advisory Unit.