Docstoc

Analyzing Gender Differences on Corporate Boards

Document Sample
Analyzing Gender Differences on Corporate Boards Powered By Docstoc
					                   Analyzing Gender Diversity on Corporate Boards
                                    Holly Morris

                Advisors:        Professor Laura Ettinger
                                 Professor Mary Graham

                                   Clarkson University
                Interdisciplinary Engineering & Management Department
                                   Potsdam, NY 13699


Introduction:

In a 1991 study, “The Glass Ceiling Initiative. A Report,” the U.S. Department of Labor
defined “the glass ceiling” as “those artificial barriers based on attitudinal or
organizational bias that prevent qualified individuals from advancing upward in their
organization into management-level positions.” The Glass Ceiling Commission came out
of this study – a committee that existed from 1991 – 1996 dedicated to researching,
understanding, and essentially “solving” the glass ceiling and the reason for its existence
in corporate America. The ambiguous aura that surrounded the glass ceiling in 1991 still
exists today; it is a complex concept to create tangible solutions for. Unfortunately,
because of this ambiguous aura, women still have unequal representation in senior
executive management and corporate board positions in corporate America today.
(United States)

Partially because its persistence in corporate America is so difficult to understand, and
partially because so many scholars have already attempted to “shatter” it, I have decided
not to solely focus on the glass ceiling for my own research. I am, however, interested in
investigating a particular component of the glass ceiling – that being the small presence
of women on corporate boards, also referred to as the board of directors, particularly in
Fortune 500 companies.

In large, publicly traded companies such as the Fortune 500, the members of the board of
directors will not usually hold top executive positions within the company. For instance,
it is not uncommon in Fortune 500 companies for the CEO to be the only member of the
organization to be a “top executive” as well as hold a seat on the company’s board.
Because of this, corporate boards tend to employ a supervisory role – a little more
“behind-the-scenes” than the executive suite. This distinction between corporate board
and executive suite in a Fortune 500 company makes the small number of women who
hold corporate board positions in Fortune 500 companies all the more intriguing to me. It
is no wonder that the glass ceiling still exists in corporate America when women still find
difficulty in obtaining positions that are considered “behind-the-scenes.” Corporate
boards of Fortune 500 companies, and the deficiency of gender diversity in them, is the
research area that provided me with the motivation for this thesis.
Motivation:
Disparity between current research concerning ideal gender diversity on corporate
boards and the actual make-up of Fortune 500 companies’ boards

As a woman entering into the business world in the near future, I am extremely
concerned by existing male-dominated corporate boards of Fortune 500 companies.


Current Research:

Current research indicates that a positive correlation exists between a Fortune 500
company’s performance and the gender diversity of its corporate board. Fortune 500
companies include the top 500 American public corporations ranked by gross revenue.
The improvement in company performance is not merely financial (usually measured by
Return on Equity, Total Return to Shareholders, and Return on Investment) – studies
show that gender diversifying a corporate board also increases “non-financial
performance measures.” These “non-financial performance measures” include: increased
company connection to consumer markets and customers, greater attention placed on
social and community responsibility, augmented company innovation, and the promotion
of collaboration and power-sharing deliberations (Stephenson 2). Despite the wealth of
information now available supporting a positive relationship between company
performance and gender diversity, numbers of female board members in Fortune 500
companies still remain relatively stagnant from ten to fifteen years ago.

There are two measures of “female progress” in reference to the number of women in
executive positions on corporate boards in Fortune 500 companies: 1) the proportion of
companies that have at least one woman on their corporate board, and 2) the proportion
of actual board seats held by women in Fortune 500 companies as a whole. Current
research shows that measure one of female progress is drastically more promising than
measure two. A Catalyst study conducted in 2003 concluded that 89.2%, or 429, of the
487 Fortune 500 companies surveyed in the study had at least one woman on their
corporate board (Peterson 176). The 89.2% statistic is highly misleading however, as 395
of the 429 companies had one – and only one – woman on their corporate board.
Accounting for measure two of “female progress,” the study concluded that women
actually only held 13.6% of the board seats overall. This is only a 5.3% increase in
proportion of women board directors overall in Fortune 500 companies from 1993.
(Peterson 178)

A percentage like 13.6% for female-held corporate board seats is shocking when
considering the immense impact a gender diversified corporate board can have on a
Fortune 500 company’s financial, social, and innovative performance. In January 2004,
Catalyst presented another study examining the financial performance of 353 Fortune 500
companies from 1996 – 2000. The study demonstrated that the group of companies
which had the most equal ratio of men to women on their corporate boards had 35%
higher Return on Equity and 34% higher Total Return to Shareholders figures than
companies which had a less equal ratio of men to women on their corporate boards. In a
study by Roy Adler which tracked a specific group of women in “high-ranking positions”
in 215 Fortune 500 companies from 1980 – 1998, 25 of the companies which had the best
records of promoting women to corporate board positions throughout the time period had

                                           2
18% higher TRS and 69% higher ROI values than the Fortune 500 medians in their
industries. (Stephenson 3)

Besides developing company financial performance, women are also greatly enhancing
company social and innovative performance. Research concludes that the addition of
women to corporate boards in Fortune 500 companies is now a “business imperative,”
because women bring entirely different perspectives and experiences with them to the
table. Having women on a corporate board makes logical business sense – it enables a
company to more successfully connect to its customers and consumer market. The
female population is currently responsible for over 80% of all purchases of goods and
services within the United States. As Catherine M. Daily argues in “Women in the
boardroom: a business imperative,” why would it make sense to not include women on a
company’s corporate board when you would essentially be eradicating 50% of your
consumer market? And that is not even considering that the 50% of the consumer market
who would be eliminated is responsible for the majority of purchases in the United
States. (Daily 2) The underlying question that then follows is this: If a gender
diversified corporate board produces better financial, social, and innovative
performance in studied Fortune 500 companies, why are not all American
corporations embracing these findings?


Objectives:

   1. Understand significance of current statistics concerning female corporate board
      members in Fortune 500 companies through literature research
   2. Research possible explanations of why having women on a corporate board
      generates better financial, social, and innovative performance for a company
   3. Research possible causes of why all American companies are not embracing
      gender diversity for their corporate boards
   4. Examine why demand for “gender diversity promoting” organizations’ services
      exists


Hypothesis:
Women continue to be denied corporate board positions despite their presence adding
value to a Fortune 500 company’s financial, social, and innovative performance because
they are considered “unqualified.”


Methodologies:
Literature research, volunteering at “gender diversity promoting” organizations,
one-on-one interviews

So far from my preliminary research, I have realized that there is a tremendous amount of
available information concerning gender diversity on corporate boards. The majority of
my literature research will be performed electronically using ProQuest. In addition, I
have acquired a membership to The College of New Jersey’s library which will allow me
to do literary research using its print resources.


                                            3
I wish to incorporate as much “real-world” experience and information into my thesis as
possible because the topic is so personal to me. In the spring and summer of 2008 I am
on co-op at Accenture – a technical consulting and services’ company – so this real-world
experience will be possible to include in my thesis. I plan on gaining real-world
information by volunteering at “gender diversity promoting” organizations, as these
organizations are a vital link between research and Fortune 500 companies when
considering gender diversity and corporate boards.

Further proof that a discrepancy does indeed exist between current research involving
gender diversity on corporate boards and current American corporate board structure lies
in the establishment of “gender diversity promoting” organizations. The very existence
of these organizations is interesting to note, as they certainly would not have been created
if no demand for them existed. To explain, I will use an example of a “gender diversity
promoting” organization that currently exists in the United States. The Boston Club,
founded in 1976, is a “not-for-profit organization of more than 475 of high-achieving
professional and executive women dedicated to promoting the advancement of women in
business” (Adams 436). The Boston Club also acts as a consulting organization; large
corporations from around the world hire The Boston Club to attempt to diversify their
corporate boards through research, networking, and suggestions of possible female board
candidates. Other “gender diversity promoting” organizations include: Catalyst, The
Chicago Network, and The Forum of Executive Women. The very existence of these
organizations greatly concerns me, however; if American companies are not capable of
gender diversifying their corporate boards on their own, how and when will potential
female executives get a chance?

I have contacted board members of two “gender diversity promoting” organizations:
Catalyst, located in New York City, and The Forum of Executive Women (FOEW),
located in Philadelphia, PA. I plan on volunteering at Catalyst through the spring and
summer of 2008 in order to both add value to their organizations as well as to obtain
information (through resources available at the organization and networking) for my own
hypothesis. I have not yet received a response from FOEW, so I am doubtful as to my
ability to volunteer at this organization.

The majority of the information I will collect to support my hypothesis will come from
6 – 8 one-on-one interviews with both men and women who hold corporate board
positions within Fortune 500 companies. I plan to primarily focus on Accenture’s
executive team – researching its members to establish if they hold board of directors’
positions within Fortune 500 companies. Currently, I have one interview secured with
Pamela J. Craig, the Chief Financial Officer of Accenture, who holds a corporate board
position at Avanade, Inc., a joint technical services venture between Accenture and
Microsoft. I also plan on researching Clarkson’s own board of directors to understand if
any of its members currently hold board positions within Fortune 500 companies, or held
positions in the past. I know that securing interviews with such prominent board
members of Fortune 500 companies will be my biggest obstacle for my thesis. However,
the information extractable from the one-on-one interviews is vital to my hypothesis, and
the research area of the thesis as a whole. The interviews will allow me to dive further
into the dynamics between women and corporate boards, and how their presence affects
various facets of company performance.


                                             4
I plan on applying for IRB certification and researching the interview process
immediately. Given that the men and women I will be interviewing are extremely
important executives within Fortune 500 companies and that I will be tape recording all
interviews if granted permission, I will make certain to respect the privacy of those I
interview.


Time Table:

Fall 2007
Solidify mentor relationship
Preliminary literature research

Spring 2008 (Co-op at Accenture)
Literature research
Draft thesis proposal
Volunteer at Catalyst
Secure IRB certification
Conduct one-on-one interviews

Summer 2008 (Co-op at Accenture)
Continue literature research
Continue one-on-one interviews
Volunteer at Catalyst
Analyze interview information
Write preliminary draft of thesis

Fall 2008
Write final draft of thesis
Thesis presentation




                                            5
Works Consulted:

Adams, Susan M. and Patricia M. Flynn. “Actionable knowledge: consulting to promote
      women on boards.” Journal of Organizational Change Management. 18.436
       (2005). 10 September 2007. <www.emeraldinsight.com/0953-4814.htm.>

Daily, Catherine M. and Dan R. Dalton. “Women in the boardroom: A business
       imperative.” The Journal of Business Strategy 24 (2003): 8-9.

Hyland, MaryAnne McCormick and Patricia Ann Marcellino. “Examining gender on
      corporate boards: a regional study.” Corporate Governance 2 (2002): 24-31.

Murphy, Steven A. and Michael L. McIntyre. “Board of director performance: a group
      Dynamics perspective.” Corporate Governance 7 (2007): 209-224.

Peterson, Craig A. and James Philpot. “Women’s Roles on U.S. Fortune 500 Boards:
       Director Expertise and Committee Memberships.” Journal of Business Ethics
       72 (2007): 177-196.

Sellars, Patricia. “Women on Boards (Not!).” Fortune 15 October 2007: 35.

Stephenson, Carol. “Leveraging diversity to maximum advantage: The business case for
       appointing more women to boards.” Ivey Business Journal Online. London:
       September/October 2004, A1. 28 September 2007. <http://proquest.umi.com/
       pqdweb?did=sid=3&srchmode.>

United States. The Department of Labor. Glass Ceiling Committee. “The Glass Ceiling
       Initiative. A Report.” Washington, D.C. 1991.

Veleva, Vesela. “Gender diversity and financial performance.” Citizens Advisers. 2005.
       <http://citizensfunds.com/common/pdfs/Gender_Diversity_Paper_1105.pdf.>




                                          6

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:12
posted:8/13/2011
language:English
pages:6