Women Add Value to Private Boards
They can boost the bottom line, bring ‘emotional intelligence’ to the boardroom.
The slow pace of women heading to the nation’s private company boardrooms mirrors the sluggish rate at public companies. That’s bad news because experts say women now entering the world of governance offer more than ever before.
Both private and public boards have a comparable percentage of women directors, according to the 2016 Global Survey of Directors from WomenCorporateDirectors Foundation and Spencer Stuart — around 18%. An exact number is unavailable as private companies have no requirement to report the makeup of their boards.
But as generations move forward, progress is being made, says Ivy Silver, founder of Sparkplug Innovations, a consulting firm, and a founder of Mily-on, an architectural design firm. Many private companies are family businesses and the boards are built from the founder’s needs or wants. As subsequent generations work their way up in the business, the face of the boards have and will change.
“There are a number of second and third generations at family governance institutes and universities,” says Silver, a member of several public, private and nonprofit boards of directors. “There are more women who are coming into those transitions (of succession) on their own. A woman on the board in the past was often there because of estate planning due to a death and she inherited the position.”
A shift, she says, started in the 1960s, when women started attending business school and building their own businesses. It’s a shift that continues today.
She says the growth of women in business, life sciences and technology has widened the pool of candidates for board service.
How companies build their boards also has an effect on who sits on them. If the founders are looking for venture capital, private equity investors, or people in their own industry, that pool is heavily dominated by men.
Once the private companies have established their investors, the boards extend out, Silver says. They need to “build a values proposition to allow diverse voices.”
“The advancements of women on private boards, from my view, has been slow-going,” Silver says. “I’d say the equivalent to the public boards, though public boards have a lot more scrutiny today from their shareholders than private companies.”
Indeed, large investors such as Blackrock are pushing public firms to add more gender diversity or face the consequences.
Even though private companies aren’t forced to add women, Susan Stautberg, co-founder and co-chair of WomenCorporateDirectors, says there are several reasons companies should add women to their boards.
The pool of experienced male directors is limited, she says, and they are often serving on a number of public boards already and don’t have any additional time. Women directors who are not over-scheduled with a number of other boards, she explains, can dedicate the time a private company needs to steward growth.
There is a wealth of data on the financial boon companies receive from an increased number of women on public boards. And Patricia Connolly, executive director of the Center for Corporate Governance at Drexel University’s LeBow College of Business, believes that’s the case for private boards as well.
Research shows women in the boardroom bring a fresh voice, a different point of view and a new way of handling conflict. Those qualities lead to greater success to the business.
Companies with sustained high representation of female directors (three or more in at least four of five years) outperformed those with sustained low representation by 84% on return on sales, 60% on return on investment capital and 46% on return on equity, according to Catalyst’s The Bottom Line: Corporate Performance And Women’s Representation On Boards.
Among those skills women bring to the table is a different perspective, Connolly maintains, a different way of evaluating situations and what is called “emotional intelligence.”
Even when a private company brings in a women director, that doesn’t mean it’s always smooth sailing from there. Sometimes women still face resistance.
“There are strategies for any woman in the boardroom,” Silver says. For instance, there have been times in her board career that her recommendations fell on deaf ears. However, when a male colleague made the same suggestion, it was embraced.
Some of that may be unconscious bias.
“It has a lot to do with whether the leader at the table is aware and conscious. Are they sensitized to it,” she says. For their part, women need to find the balance between building trust and pushing to be heard.
When Silver’s suggestions are rejected, she doesn’t roll over. She makes it clear, if appropriate, that she was the first to come up with an idea, but goes out of her way not to be too pushy and offend fellow board members.
In fact, according to the Forum of Executive Women’s, “2017 Women in Leadership Report,” companies with three or more women board members tend to have better financial performance; dynamic environment created where women have influence and their perspectives are valued.
It’s a fine balance indeed, but she feels women can do this well.
“That’s one of the advantages I think women have, significant emotional intelligence,” Silver says. “I’m not saying more (emotional intelligence) than (men), but that it’s developed over the years to a fairly significant emotional competency. This helps with dynamic issues of family, family transitions, family ownerships.”
Women are often the peacemaker, she adds. “We know how to have people trust us over time. That’s part of what you have to do is build trust to make any kind of real change.”