Anyone who runs a company has to put together a board. And as we have seen throughout 2016, diversity on boards has been a hot button issue in Corporate America.
From Facebook's diversity report to the Business Roundtable's Principles of Corporate Governance report, there's a growing recognition that diversity at the top is good for company performance and for investors. That belief has to be mandated from the Chairman of the board and CEO down, which means the boards themselves have to "walk the talk."
And yet the number of women on boards remains stuck at about 20% for S&P 500 companies. Part of the reason is that board seats don't come up very often which means trying to change the make-up is a slow process. The other reason is something we hear about often: there aren't enough female candidates.
Beth Stewart, the CEO of Trewstar, says that's absurd. Her firm specializes in placing women on boards and over the last several years, she has placed over 30 women on boards at Fortune 500, mid-cap and private equity companies.
Her method, she writes in a recent article for Harvard Business School, is devastatingly simple: interview the women first.
When a lineup of women are interviewed first before any male candidate, Stewart says the placement rate is 100%. That's because once a board is made aware of a slate of female candidates, they always find someone they want. The problem lies not in the lack of candidates but the lack of awareness.
The idea doesn't seem novel but in the world of board searches, it surprisingly is. Finding board members is more art than science. It entails a collection of different methods, from hiring an executive recruiting firm to tapping internal and external networks for names of candidates. Many times, board candidates are found because of a recommendation. There is no "national list of board candidates" where potential members are queued up in a line.
The problem, Stewart says, is that these methods exclude women. For one, board members often do not know a wide range of senior women. Two, some board requirements naturally limit the number of women candidates. If a board position requires that a candidate must be a CEO, that is instantly going to disqualify some women who are capable but do not hold the CEO title.
Another problem, Stewart says, is the way recruiting firms make money. She points out that board searches are a "loss leader" for many recruiters, who do it because it leads to more lucrative executive recruiting contracts. Because board searches typically generate less revenue, Stewart says recruiting firms do not place as many resources behind finding those "needle in a haystack" board candidates; most of their time is spent looking for the right managers and executives.
Stewart argues if every board on the S&P 500 opened up two board seats with the intent of not putting a male candidate in it, then went about interviewing women first for those positions, there would be a "tsunami" of change where women would quickly make up 40% of all boards. Of course, that also does not take into account the other diversity that needs to happen on boards--namely, putting more minorities in those spots, too. Either way, her mission appears to be headed in the same direction as the boards and companies themselves. Now it's a matter of making them walk the talk.
Sallie Krawcheck, the Wall Street veteran and founder of Ellevest, has her own solution on diversity in Corporate America: encourage more women entrepreneurs and investors. Her company recently raised $10 million primarily from other women. Hear her talk about the sea change she is seeing in the venture world in my Facebook Live interview with Krawcheck: