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Gender Diversity on Corporate Boards: The Thirty Percent Coalition and the Critical Mass Effect
September 24th, 2012
Achieving gender diversity on corporate boards and paying attention to numbers are common themes in a 2006 groundbreaking report on critical mass on corporate boards and a new national coalition working to almost double the percentage of women on US public company boards.
The notion of “critical mass” has been applied to groups of people since the late 1970s. In that same period, Rosabeth Moss Kanter published her groundbreaking article, “Some Effects of Proportions on Group Life: Skewed Sex Ratios and Responses to Token Women.” Although she didn’t use the term “critical mass” specifically, Kanter proposed that “as the percentage of women in a group increases, the women can, first of all, form coalitions, support one another and affect the culture of the group.”
It was not until 2006 that the notion of critical mass was applied to gender diversity in the corporate boardroom, when Vicki W. Kramer (V. Kramer & Associates), Alison M. Konrad (Richard Ivey School of Business, University of Western Ontario), and Sumru Erkut (Wellesley Centers for Women) published their landmark research on “Critical Mass on Corporate Boards: Why Three or More Women Enhance Governance.” Based on interviews and discussions with 50 women directors, 12 CEOs, and seven corporate secretaries from Fortune 1000 companies, Kramer et al showed that a critical mass of three or more women can cause a fundamental change in the boardroom and enhance corporate governance.
This study extended previous research and writing on corporate governance, particularly with findings that drew attention to the importance of boardroom behavior and dynamics related to the number of women directors. In addition to employing critical mass theory, the Kramer-led study built on research on minority and majority influence on group decision-making as well as tokenism theories.
How Women Directors Make a Difference
Kramer and her colleagues confirmed previous research findings that women bring significant value to boards and spelled out the ways that women make a difference in the boardroom. Women bring a collaborative leadership style that benefits boardroom dynamics by increasing the amount of listening, social support and effective problem-solving. Although women are often collaborative leaders, they do not shy away from controversial issues. Many of the research participants believed that women are more likely than men to ask tough questions and demand direct and detailed answers. Women also bring new issues and perspectives to the table, broadening the content of boardroom discussions to include the insights of multiple stakeholders. Women of color add a further dimension that broadens boardroom discussions even further.
According to the findings of the Critical Mass study, “The magic seems to occur when three or more women serve on a board together. Suddenly having women in the room becomes a normal state of affairs. No longer does any one woman represent the ‘woman’s point of view’ because the women express different views and often disagree with each other. Women start being treated as individuals with different personalities, styles, and interests. Women’s tendencies to be more collaborative, but also to be more active in asking questions and raising different issues, start to become the boardroom norm. We find that having three or more women on a board can create a critical mass where women are no longer seen as outsiders and are able to influence the content and process of board discussions more substantially.”
Research continues to be generated on the business case for gender diversity in the boardroom. A new Credit Suisse study of almost 2,400 companies suggests that boardroom diversity improves corporate performance. In fact, companies with more than one woman on their board performed 26% better over the past 6 years than those with no female directors. Another landmark study for 2012 was recently published by the Committee for Economic Development entitled “Fulfilling the Promise: How More Women on Corporate Boards Would Make America and American Companies More Competitive.”
Moving the Numbers
Even though the importance of increased gender diversity, particularly attaining a critical mass, in the corporate boardroom has been widely studied and discussed for years, the percentage of women in corporate boardrooms has barely changed, hovering around 16%.
A number of women’s organizations and others have documented and reported the numbers and, over the past several years, there has been a lot of work on the “supply side,” making sure there are qualified women who are available to boards. But since the needle hasn’t moved for many years, many of those who have been involved in the issue of board diversity have decided that it’s time to tackle the “demand side” and work to encourage companies to take positive steps to open the boardroom doors for qualified women to serve.
In late 2011, Kramer, the lead author of the Critical Mass research, along with a group of colleagues, organized a national Summit of women’s organizations, institutional investors, senior business executives, corporate governance experts and board members. The participants at the Summit formed a national coalition to act jointly to move the numbers, setting a goal of multicultural women holding 30% of board seats across public companies by the end of 2015. Starting with 27 members and growing quickly to more than 40, the new Thirty Percent Coalition believes in the power of collaborative effort and a chorus of voices to achieve gender diversity in public company boardrooms. In a June 28th letter to US public companies with no women on their boards, signed by approximately 75 institutional investors and national women’s organizations, the Thirty Percent Coalition made the connection between improved corporate governance and having a critical mass of three or more women on a board and announced its 30% goal. The letter was the first of what will be a variety of initiatives designed to make a positive and measurable impact on US public company boards.