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Table of Contents Welcome to our collection of short essays on boardroom diversity. They were penned to encourage fresh thinking on how we can jumpstart the selection of more women as corporate directors and enhance board performance. We thank Bloomberg LLC for printing our collection of short essays.

Susan Ness

Chair, SAIS Global Conference on Women in the Boardroom LEVERS OF POWER – OVERVIEW

Applying the Levers of Power to Achieve Board Diversity: A Call to Action Susan Ness

LEVERS OF POWER – CHANGING CORPORATE MINDSETS

Companies Should Lean In Too: Report on Diversity from the Milken Institute Global Conference Peter Grauer and Michael Milken

Board Diversity by Design at Voya Financial Rodney O. Martin, Jr.

The Warning Sign of Unconscious Thinking (Bias) and How to (Begin to) Overcome It Laura Liswood

LEVERS OF POWER – ENGAGING THE INVESTMENT COMMUNITY

The Economics of Board Diversity Massachusetts State Treasurer Deborah B. Goldberg

Promoting Board Diversity: A Role for Investors Timothy Smith

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LEVERS OF POWER – GLOBAL INSIGHTS

FTSE 100 Achieves 25% Target Denise Wilson What Norway Can Teach the U.S. About Getting More Women in to Boardrooms Professor Aaron Dhir

LEVERS OF POWER – REIMAGINING THE SELECTION PROCESS

The Time is Now for Diversity on Boards Deborah Gillis

Five Steps You Can Take to Increase Your Board’s Diversity Bonnie Gwin

Board Gender Diversity: A Governance and Career Advantage Deborah DeHaas

Galvanizing the Diversity Triangle Carol Rosati

LEVERS OF POWER – ENGAGING THE PUBLIC SECTOR AND THE PUBLIC

Opening the Boardroom Door to More Women: Employing demand side strategies that fit in the U.S. Charlotte Laurent-Ottomane

LEVERS OF POWER: ENGAGING FAMILY OWNED COMPANIES

The Growing Influence of Family-Run Companies – and What it Means for Women in the Boardroom Susan Stautberg

ABOUT THE CONTRIBUTORS

Contributor Bios

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LEVERS OF POWER: OVERVIEW

Applying the Levers of Power to Achieve Board Diversity: A Call to Action

By Susan Ness, Chair, SAIS Global Conference on Women in the Boardroom After six years of convening the annual SAIS Global Conference on Women in the Boardroom, I believe it is time to take stock of the lessons learned and progress made in changing business mindsets to embrace diversity as a strength, not as an obligation, and in establishing a well-diversified board of directors as the norm in the United States. The SAIS Center for Transatlantic Relations, a highly-rated think tank affiliated with Johns Hopkins University’s School of Advanced International Studies, first assembled a global group of corporate executives and academics in September 2010 to explore the impact of Norwegian and other EU member state gender quotas on boardroom diversity. What was the business case for board diversity?1 And what lessons could be applied to the U.S. market, where progress had been flat-lined for over a decade, and where few executives were even aware of the robust gender quota debate abroad? In the United States, the percentage of female board members of Fortune 500 companies inched up from 14.7% in 2005 to 16.9% in 2013, and, using S&P 500 data, from 18.2% in 2013 to 19.2% in 2014 (Catalyst). And in 2014, 24 of the S&P 500 boards (5%) still had no female directors (Spencer Stuart). In contrast to the United States, the quota debate resonated in the United Kingdom and Australia. In both countries, the government worked closely with the business community to apply voluntary measures to achieve impressive results. In 2010, incoming British Prime Minister David Cameron asked former Labor Minister Lord Mervyn Davies to assess why so few women were serving on UK boards, and what could be done about it. Due in large measure to the skillful leadership of Lord Davies, the percentage of female members on FTSE 100 boards leapt from 12.5% to 25% in just four years. Today there are no FTSE 100 all-male boards, and only 16 FTSE 350 all-male boards remain. In Australia, an advisory council to the Australian Stock Exchange created a multi-faceted campaign to increase board diversity. As a result of that campaign, female representation on ASX 300 boards climbed from 11.5% in 2011 to 17.7% in 2014, and the mindset of Australian business executives regarding diversity has changed.

1 Various studies show that companies with greater board diversity outperform companies with all-male boards. See, e.g.,

“Women Matter: gender diversity, a corporate performance driver,” McKinsey & Company, 2007; “The Bottom Line: Corporate Performance and Women’s Representation on Boards,” Catalyst, 2007; “Gender Diversity and Corporate Performance,” Credit Suisse Research Institute, 2012.

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Over the past six years, we have identified a variety of pressure points that -- collectively -- can drive inflection points in achieving board diversity. These levers of power encompass both the actors who have the clout to influence board diversity as well as the tools that can be deployed to accelerate diversity. The actors include federal and state governments, business executives, institutional investors, major business associations, stock exchanges, search firms, shareholders and public interest organizations. The tools include legislative mandates, disclosure requirements, corporate governance “best practices,” peer pressure, shareholder votes, and public pressure. It will take a combination of these actors and tools to accelerate the achievement of gender parity on corporate boards and in top management. Government Levers of Power:

Quotas: While quotas are a highly effective tool abroad, the U.S. government is highly unlikely to adopt a quota regime, and the consensus among SAIS Conference participants has been to pursue voluntary, business-led solutions.

National Government Leadership: In every country making significant progress, government leadership has played a critical role. Two years ago, our CEO Roundtable participants unanimously identified the lack of government engagement as a major impediment in the United States. While Administration officials have spoken passionately on the issue, the government has declined to play a leadership role. The U.S. Securities & Exchange Commission has failed thus far to strengthen its proxy disclosure rules to elicit more impactful corporate responses. The government should consider requiring companies on which it holds a board seat, or companies that are government contractors or suppliers, to establish and report on their own diversity goals.

U.S. Congress: In our federalist system, states regulate corporate governance. Still, Congress could hold a hearing to examine why so many countries have surpassed the United States in board diversity, and the impact of diversity on global competitiveness. It also could adopt a resolution urging greater board diversity, or call for the creation of a high level task force to address the issue.

State and local leadership: At least three state legislatures (California, Illinois and Massachusetts) have adopted or are considering non-binding resolutions to encourage state-incorporated companies to improve the gender balance of their

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boards. They provide that companies with nine or more directors should have at least three female directors; those with six to nine directors, at least two female members, and those with five or fewer directors, at least one female member. While no action is mandated, the resolutions establish a “best practices” baseline. State and city treasurers are using their fiduciary clout to persuade portfolio companies to step up from none, or from “one and done.”

Securities commissions - disclosure: Last year, the Ontario Securities Commission adopted disclosure rules that require, on a comply or explain basis, listed companies to publish information on the number of women board members and executive officers, targets for the representation of women on the board and in executive positions, and state whether the board has a tenure policy.2 The rule went into effect in January 2015, and its impact is under active review. Australia and the UK have similar disclosure rules. In contrast, in 2010, the SEC required companies simply to disclose whether they have a policy on board diversity, but did not define the term. Multiple studies have found the SEC provision wholly ineffective to inform shareholders about diversity practices.3

Private Sector Levers of Power

Institutional investors: Institutional investors -- including state and city treasurers and comptrollers -- have been the primary movers in the United States, applying their voting clout to persuade portfolio company boards to diversify. Some have filed resolutions challenging all-male boards, while others have launched index funds comprised of companies with significant female board membership and/or management leadership.

Stock Exchanges: Stock exchanges in Australia, Italy, United Kingdom, Malaysia, and New Zealand are a lever to encourage gender diversity on listed company boards. For example, the ASX Corporate Governance Council revised its Corporate Governance Code to require on a comply or explain basis that companies publish their diversity numbers as well as their targets for board diversity and how they plan to achieve them.

Major business organizations: Major business organizations have the respect and membership clout to encourage adoption of best practices for board composition,

2 http://www.osc.gov.on.ca/documents/en/Securities-Category5/csa_20141014_58-101_noa-national-instrument.pdf

3 See, e.g., Aaron Dhir, Challenging Boardroom Homogeneity: Corporate Law, Governance, and Diversity

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including diversity. These trusted organizations are well-positioned to engage with their members on the business case for board diversity.4

Nominating/Governance Committees: The “Nom/Gov” board committee is best positioned to establish a diversity policy, set targets for both female and minority inclusion, and ensure that such candidates are seriously considered for every vacancy. The Committee for Economic Development (CED) has launched a major campaign to engage with Nom/Gov Committee members and to encourage them to set a goal to select a female candidate for every other board vacancy.

Search Firms: Search executives can persuade clients to look beyond the “usual suspects” by supplying a broader selection of qualified candidates, and ensure that at least one female candidate is interviewed for each vacancy (similar to football’s Rooney Rule). Search firms can also encourage CEOs to “sponsor” a female executive for an outside board position. Lord Mervyn Davis convinced UK-based search firms to sign a “Voluntary Code of Conduct.” Sadly, the U.S. affiliates of these firms have not done so here.

Public Pressure: Organizations are using the press and social media to “name and shame” companies that have no women -- or only one -- on their boards. Others encourage greater diversity by celebrating those companies (and their leaders) that have at least 30% female board members.

Prior SAIS Global Conference Roundtable sessions examined the root causes for limited progress, and found that, in addition to the leadership void, low director turnover rates in the U.S. have hindered placement of more women. 2014 was a watershed year for both the number of vacancies (371) and the percentage (30%) of vacant seats being filled by women on S&P 500 boards. Yet, even at this accelerated pace, it will take until 2045 before gender parity is achieved. Institutional investors and their advisory groups have focused on tenure issues and are pressing for updated director refreshment policies.

4 For example, in Australia, Male Champions of Change, a prestigious group of male CEOs and board members, regularly

meets with their peers on board diversity, sponsors women for future board service, conducts research and tracks progress. The Australian Institute of Company Directors offers seminars on board diversity, training programs for director candidates, and tracks and publishes progress, ranking companies by the percentage of women on their boards. In the UK, the CBI is a facilitator, connector and intelligence resource for UK businesses on diversity. The 30% Club, an organization of CEOs and board chairs with chapters in the UK, the U.S., and seven other countries, is making inroads with corporate leaders. The Institute of Directors in Kenya recently called for inclusion of board gender diversity progress in the companies’ annual statements, while the private sector in Morocco, Malawi, Nigeria and South Africa has integrated gender diversity into principles of good corporate governance.

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Call to Action The United States is blessed with the largest pool anywhere of female and minority candidates who are well-qualified to serve on the boards of publicly traded companies. The issue is not the supply of candidates to fill the seats that turn over, rather it is the demand. If we are to make progress in the United States without government mandates, it is incumbent upon business executives to step up to the plate and set their own targets – and to publish progress made, recognizing that “what gets measured gets done.” But we can do more. Diversity by design should be the benchmark for public and private companies alike – not just for board composition but also for senior management. Both female and racial/ethnic diversity goals should be baked into key performance indicators. And private companies intending to go public should not wait until after they file their registration statement with the SEC to diversify their board lest they risk a public backlash (like Facebook and Twitter). Collaboration among all of the players – government, business executives, institutional investors, major business associations, stock exchanges, corporate governance experts, search firms and strategic organizations – is essential if we are to alter the current tepid trajectory and achieve gender parity on boards and in top management during our lifetime.

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Companies Should Lean In Too

By Peter Grauer and Michael Milken, April 27, 2015 This week, 3,500 of the world’s most creative and influential leaders from more than 60 nations will gather in Los Angeles for the 18th annual Milken Institute Global Conference. Over the years, the Global Conference has tackled the world’s most complex challenges in 11 broad areas, including public health, energy and the environment, access to capital in emerging markets, technological disruption, government, philanthropy, education reform, aging, job creation and medical-research funding. A special focus of this year’s conference is women and girls, an initiative reflected not only in the topics addressed, but also in the fact that nearly 30% of the 700 panelists are women. Among them is Sheryl Sandberg, whose 2013 book “Lean In” sparked greater interest in gender equality and urged women to expect and demand more for their careers. There’s no question this message is getting through, particularly among younger women, who are vocal in advocating for themselves. They see the greater number of women in public office as a hopeful sign. Yet the statistics tell us we still have a long way to go. Only 26 women are Fortune 500 CEOs. Eighty-three percent of these companies’ executives are male. In the financial services sector, entry-level employees reflect gender parity, but only 27% of senior managers are women. What’s causing this divide? Asking women to “lean in” is only half the battle. Companies need to accept greater responsibility for building more-diverse workplaces—and that responsibility starts at the top. Too many companies treat gender equality as an issue for the human-resources department. Hiring a head of diversity is merely symbolic if that person doesn’t have influence and regular access to the executive team. Change can happen fast when companies make a commitment at the highest levels. Helena Morrissey, another Global Conference participant and CEO of London-based investment management firm Newton, has led the way for many companies in the U.K. and around the world. Early in her career, after returning to work from her second maternity leave, Helena was passed over for a promotion because her employer didn’t believe she would stay committed to her job. Several years later, with companies showing few signs of progress on diversity, Helena launched the 30% Club, with the goal of achieving that level of representation by women on the boards of directors of FTSE 100 companies from what was then 12.5%. In only

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five years, thanks in part to her dedication, board representation has nearly doubled. As important, all 100 companies have at least one woman on their board now, compared with just 27 when the effort began. The 30% Club’s tremendous success in the U.K. can be replicated in the U.S., where currently 17% of Fortune 500 board members are women. Since launching in the U.S., the 30% Club has recruited more than 40 chairmen and CEOs to pledge their commitment to better gender balance. The U.S. 30% Club is also working with supporters to build a network of senior executives who will mentor promising midcareer women. Gender diversity on corporate boards is the right thing to do and it makes economic sense. Every day, we see the value of different backgrounds and perspectives in corporate decision-making. Diversity of background encourages diversity of thought and stronger leadership: A 2004 Catalyst study found that companies with more women in top management positions experienced better financial performance than their peers. Companies that prioritize gender diversity will be most successful when diversity is taken for granted in the C-suite and boardroom. Women are assuming greater ownership of their career advancement than ever before. It’s time for companies to lean in, too. Mr. Grauer is chairman of Bloomberg L.P. and U.S. chairman for the 30% Club. Mr. Milken is chairman of the Milken Institute. Reprinted from The Wall Street Journal © 2015 Dow Jones & Company. All rights reserved.

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Board Diversity by Design at Voya Financial

By Rodney O. Martin Jr., Chairman & CEO, Voya Financial It is an honor to be invited to participate in the SAIS Global Conference on Women in the Boardroom and to be asked to contribute an essay on such an important topic. As one of our board members at Voya Financial aptly noted, it is difficult to make a case for the significant value that diverse boards contribute – to the organizations that they govern as well as to society – that has not been made by experts across numerous and various industries and stakeholder groups. I would like to share how Voya made board diversity an essential aspect of its governance structure when the company went public in 2013. I will also highlight how the diversity of our board has contributed to our success to date and how we see our board diversity – four of our nine independent directors are women, and our board diversity also includes professional expertise, ethnicity, education and leadership experiences, among other attributes – as a competitive advantage as we pursue further growth. A purposeful decision to create a truly diverse board

As background, Voya helps Americans plan, invest and protect their savings – to get ready to retire better. Voya was created in May of 2013 via a spin off from ING Group. While Voya was created with strong and established retirement, investment and insurance businesses, and a base of approximately 13 million individual and institutional customers, I often referred to us as a 6,500-person start-up company. In creating Voya, we had an opportunity to change the culture and to change expectations. The opportunity to establish something new, built on new values and a new vision, is rare. We understood this and accepted the responsibility to create a new kind of company at Voya – including how we would approach corporate governance and evolve our board of directors. I liken this responsibility to the sentiment expressed by Thomas Paine, when he wrote in the Appendix to Common Sense, in 1776, “We have it in our power to begin the world over again.” While Paine was referring to the birth of a new nation and we were creating a new company, the opportunity to establish governance brings great responsibility. In evolving our board of directors, we researched best practices and looked at what leading companies were doing from a corporate governance perspective. The facts were clear to us – companies with more diverse boards tended to be more successful. For example, a Catalyst report on gender diversity found that companies with sustained high representation of women on their board (defined as three or more women in at least four of the preceding five years) outperformed those with sustained low representation. The

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results – an 84% advantage in return on sales, a 60% advantage in return on invested capital and a 46% advantage in return on equity – were compelling. We made a purposeful decision to create a truly diverse board because we saw it as critical to our business success and cultural transformation. Our nominating and governance committee has been deliberate in its desire to form a board that is diverse and does not simply have one person of a certain background or experience or gender, as a check-the-box exercise, but a truly diverse board without one dominant group. As one of our board members recently observed, an environment where every board conversation is engaging and enriched by a variety of viewpoints and experiences enables a better and stronger board, providing more valuable oversight and insight for the company. Having diverse views also mitigates potential blind spots, or groupthink, and allows the firm to be readily adaptable in an ever-changing competitive landscape. Board influence on Voya’s success to date

Since 2013, Voya has delivered strong results and several notable accomplishments. Our market capitalization has more than doubled, and our share price performance has outpaced our peers and the S&P 500. We achieved our 2016 goal for Ongoing Business Adjusted Operating Return on Equity, an important metric for us, two years early, in 2014. Our credit ratings have been upgraded by the major rating agencies and we have returned $1.7 billion in excess capital to shareholders. We have also earned recognition for our commitment to conducting business in a way that is socially, environmentally, economically and ethically responsible. Voya has been recognized as one of the World's Most Ethical Companies, by the Ethisphere Institute, for two consecutive years, and as one of the Top Green Companies in the U.S., by Newsweek magazine. Additionally, we received a perfect score of 100% on the Human Rights Campaign (HRC) Corporate Equality Index (CEI), an annual survey that assesses workplaces on lesbian, gay, bisexual and transgender (LGBT) equality. While it would be impossible, and inaccurate, to credit one thing for these successes and achievements, I can say with a high degree of confidence that Voya’s board of directors has influenced the company’s success to date. We are fortunate to have nine independent directors who combine to provide us with diversity of gender, ethnicity, age and skills. Our diverse board includes current and former CEOs and expertise in areas such as risk management, marketing and technology. Our group of directors also includes extensive financial services experience, government experience and corporate governance experience. This is diversity in a broad sense, and – as one of our directors shared – a successful board marries all of these attributes.

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A competitive advantage as we drive further growth

At Voya, we have built tremendous momentum and are now focused on driving further growth. As our company moves forward, we do so with the benefit of a diverse board, sharing perspectives that make our company better. As one of our board members noted, every leader needs the most diverse input that he or she can get – to see and understand the broadest range of implications of a decision to be made or an opportunity to grasp. Board diversity was designed into Voya’s DNA – and we consider it a competitive advantage. Thanks to the positive impact of events like the SAIS Global Conference on Women in the Boardroom, more organizations are seeing the compelling business case for board diversity. We look forward to influencing a broader focus on this important dialogue and to discussing how diverse boards contribute to organizational success.

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The Warning Sign of Unconscious Thinking (Bias) and How to (Begin to) Overcome It

By Laura Liswood, Secretary General, Council of Women World Leaders Much has been written, spoken, agonized about the fact that all of us harbor some unconscious bias about someone else or some group. This topic is now the new zeitgeist, the second generation discrimination for most corporations seeking to overcome the lack of adequate representation of women and other underrepresented groups. The training, which according to FastCompany, is being undertaken by more than 20% of companies, is being donebecause organizations have found that, "with such dismal diversity numbers, some employers have realized that they can't trust their own judgment anymore".

Help wanted male/help wanted female job ads are the obvious discriminators. The use of words like 'assertive' in a negative performance review for a woman and in a positive review for a man, that's subtle and frequently not so obvious. But the effects of the latter may be as harmful, if not more, than the effects of the former.

Awareness of unconscious bias is not enough, but most training is focused on that. We need prescriptions, not descriptions to truly change behavior, both personal and systemic. Warning signs and directions can help. Here are a few warning signs that the organization, and its leadership, should consider:

1) We have a woman at the top. A recent study, reported by Glass Hammer (7/17/15) from the Robert H. Smith School of Business found that there was a 'hidden negative quota' for women in top leadership. If a woman holds one of the top five executive positions at a company, the chances of a second woman being appointed in those ranks falls by 51%. Getting a second woman promoted is far more difficult, let alone attaining a critical mass or majority. Solution: One woman at the top is only the beginning not the reflection of a true sharing of power. Every position at the top (including line positions) should include at least one if not more non dominant group member for consideration. 2) The senior leaders reference their wives, daughters, mothers as their role models and why this makes them truly understand women's issues and barriers to equality. A corollary to this is "Some of my best friends are..." We all use our personal experiences to help inform the world we live in. That is heartfelt and well meaning. A male leader may think that because he wants the best for his daughter or wife he must ipso facto have an organization that would be good for women.

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Granted, according to Catalyst, the research organization, men with daughters are more sensitive to gender issues. But that is not the same thing as operating the organization with all the data available and become fact based about the differing experiences of dominant groups and non-dominant groups in the organization. Beware too, what Cheryl Kaiser of the University of Washington calls the 'illusion of inclusion'. Organizations believe they MUST be fair because they show as proof that they have an office of diversity or programs directed at enhancing diversity, even in the face of statistics or cases that show the opposite.

Solution: Use the data and statistics that are readily known or can be known. An example is to evaluate the performance reviews and track how often men are negatively reviewed for personal communication styles versus how often women are reviewed for personal communication styles. (Shelley Correll of Stanford University has found that women are three times more likely to get feedback on communication style then men and women are 66% more likely to be coached to change their communication style. Another study reported in Forbes found that 76% of womens reviews included personal comments such as 'too aggressive'; 2% of men's comments did. Any organization that collects data on its employees can ferret out this signal of unconscious bias. 3) I never noticed that... women are interrupted more than men. Women's suggestions are less likely to be taken up and given credit; men's comments are more likely to be re-credentialized, given positive deference and referred to more often. Black men and women may code-switch their speaking styles far more than white men and women. Men's overconfidence may be harmful to the decisions being made. My 'go to' person(s) look a lot like me. Solution: General awareness of unconscious bias is enlightening but specific awareness is crucial for behavior change. Managers in meetings can stop interruptions or undue deference if they first know to notice what the dynamics are. In one company I worked with research assignments were thought to be given out in a gender neutral fashion, until an actual diagram of assignments was done. Men were researching large companies in capital intensive industries; women got the small to medium companies in the service industries. Management had not noticed until it was documented and then was able to intervene positively. At minimum, the decisions on who gets what research should be made consciously (and though not likely, even if the final outcomes are the same as before).

An academic awareness of our proclivities toward unconscious bias and how our fast-thinking brains work are part of the journey but solutions and behavior change are the destination to fair, diverse and successful organizations.

Follow Laura Liswood on Twitter: www.twitter.com/LauraLiswood

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LEVERS OF POWER – ENGAGING THE INVESTMENT COMMUNITY

The Economics of Board Diversity

By Deborah B. Goldberg, Massachusetts State Treasurer & Receiver General In my inaugural address, I pledged that I would manage the state’s finances with the highest degree of professionalism and fiscal responsibility. As Chair of the Board that oversees the state’s $62 billion pension fund, I take that charge very seriously. Earning strong investment gains each year is critical when it comes to closing our unfunded liability, and our fiduciary duty to maximize returns for retirees and taxpayers remains more urgent than ever before. As companies are faced with volatile markets in an evolving global economy it is essential they become even more competitive and innovative. As an investor, the Pension Reserves Investment Management (PRIM) Board cannot stand idly by and believe that corporate governance strategies of the past will suffice in meeting the challenges of the future. Enhancing and improving board diversity must be an essential ingredient of a corporation’s mission. Companies cannot maximize sales and profits unless they proactively and effectively target all customers, including women and minorities. Incorporating different backgrounds and viewpoints into decision-making helps develop an inclusive and therefore more profitable business model. As important as board diversity is to addressing societal inequities, research demonstrates an equally compelling financial rationale for companies to incorporate this strategy into their business models. McKinsey & Company has done extensive studies which show that diversity in every form creates a dynamic that fosters innovation; that diversity of cultures, experiences, and gender helps enhance workforce talent, boosts employee satisfaction, streamlines decision-making, and strengthens a company’s image. When reviewing data from more than 350 public companies across the globe, McKinsey’s February 2015 report found that companies ranking in the top quartile in terms of racial or ethnic diversity were 35 percent more likely to post financial returns greater than the industry median. For companies ranking in the top quartile in terms of gender diversity, the likelihood of out-performance was 15 percent greater than the median. The data is clear. More diverse companies are more successful companies. As corporations compete for customers and clients across the globe, diversity is no longer an admirable social goal but an economic necessity, crucial to maximizing the bottom line.

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Boards of Directors oversee the strategic vision of their organizations. At PRIM, the pension fund holds stock in nearly 9,000 companies, which constitutes more than 40 percent of its assets. The people who manage these companies and the policies they implement have real consequences and tangible impacts on the fund’s investment returns. Through the proxy voting process, the PRIM Board can use its voice as a shareholder to influence corporate governance policies. Therefore during my first month in office I ordered an extensive review of PRIM’s proxy voting guidelines. Working with investment professionals and third-party research consultants from Institutional Shareholder Services (ISS), we proposed and the Board unanimously approved, a series of reforms. Under a new set of custom voting policies, PRIM will not vote for board nominees unless 25 percent of the board is composed of a combination of women and minorities. Last year, in contrast, PRIM voted against director nominees about 22 percent of the time. Under the new diversity policy implemented in April, that figure rose to nearly 70 percent in this year’s May-June proxy season. The intention behind our efforts is not to punish but to incentivize companies to make deliberate changes that will both internally benefit their operations and positively impact their bottom lines. These new guidelines do not reflect any political agenda. They do not regulate or restrict which companies PRIM invests in. What they do is provide an opportunity to encourage companies to address the challenges they face, and work collaboratively to develop concrete solutions. I recognize that policy changes at PRIM alone will not reverse old trends overnight. Few investors carry the clout to change the culture of the largest multi-national corporations on their own. But together with other investors both large and small our voices become heard and our shareholder power begins to expand exponentially. Achieving board diversity is truly a challenge. But the magnitude of a task should never deter us. Important societal changes that also result in financial growth and economic stability are in everyone’s best interest.

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Promoting Board Diversity: A Role for Investors

By Timothy Smith, Director of ESG Shareowner Engagement & Heidi Soumerai, CFA, Managing Director, Director of ESG Research

Nearly 25 years ago, our client, Sisters of Notre Dame de Namur, shared an innovative

idea with Walden Asset Management (Walden). At that time, investors routinely voted

company proxies in support of director nominees. The Sisters made a compelling

argument that board diversity was both a social justice and business imperative. When

women or racial minorities were not represented on corporate boards, they saw no reason

to vote for directors who were responsible for nominating new candidates.

Walden agreed with the Sisters. We embraced their approach in our own proxy voting

policies—we believe the first investment manager to do so. What’s more, right from the

outset we communicated our voting rationale to companies. Some immediately listened

and acted. In 1994, the Chairman of Echo Bay Mines notified Walden that it had added its

first woman director, stating that: “your activism for a good cause was a significant

stimulus to get us to move. Echo Bay will be a better company for it.”

THE CHALLENGE CONTINUES

Decades later, women remain significantly underrepresented among corporate directors

despite modest advances in recent years.Women held just 16 percent of S&P 1500

company board seats in 2014 and nearly one-in-five corporate boards have no female

representation at all (ISS 2015 Board Study: United States). These numbers are particularly

disappointing since women make up nearly half of the U.S. workforce (47 percent in 2013).

They are attaining educational credentials at record levels; U.S. Census Bureau data shows

women now account for about six of ten advanced degree holders among the 26-29 year

age group. Similarly, while people of color account for 38 percent of the U.S. population,

they held just 10 percent of S&P 1500 directorships and over 40 percent of the companies

had no minority representation (ISS 2015 Board Study: United States).

THE BUSINESS CASE

Walden believes that diversity, inclusive of gender and race, is a critical attribute of a well-

functioning board and a measure of sound corporate governance. Hence, we pursue a

multi-faceted strategy of shareholder engagement and public policy advocacy to encourage

greater representation of women and racial minorities on corporate boards and in senior

management. The foundation of this work is our conviction that there is a strong business

case for board diversity as described below:

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Research confirms the business rationale for diversity on corporate boards. For

example, the August 2012 Credit-Suisse Research Report Gender Diversity and Corporate

Performance correlates board diversity to better financial and stock market performance

(higher return on equity, lower leverage, improved growth prospects, and higher

price/book ratios). It suggests several explanations for these better results including a

stronger mix of leadership skills, improved understanding of consumer preferences

(women control more than two-thirds of U.S. consumer spending), a larger candidate pool

from which to pick top talent, and more attention to risk. In 2014, Credit-Suisse updated

its research and observed similar results. Additionally, numerous studies suggest a critical

mass of at least three women directors strengthens corporate governance.

Institutional investors are increasingly becoming strong advocates for progress. An

October 2014 PwC survey of investors representing more than $11 trillion in assets

observed that“Nine out of 10 investors believe boards should be revisiting their director

diversity policies, and 85 percent believe doing so will require addressing underlying

impediments…”With a representative of CalSTRS (California State Teachers Retirement

System), Walden’s Tim Smith co-chairs the Investor Committee of the Thirty Percent

Coalition—a network of corporate governance experts, corporations, senior business

executives, state-wide elected officials, national women’s organizations, and institutional

investors—which aims to encourage gender diversity in boardrooms through outreach to

companies and other initiatives. Signatories to recent letters to companies lacking women

directors have included the Comptrollers of New York State and New York City; the

Treasurers of the States of Connecticut, Maryland, Massachusetts, Pennsylvania,

Washington State, and California; representatives of CalSTRS, CalPERS and AFL-CIO;

and various foundations, religious investors, mutual funds, and investment managers.

Business leaders are themselves more vocal on the benefits of greater gender

balance in senior leadership. In 2014, a U.S. chapter of the U.K.-based 30% Club was

launched to promote board and senior management diversity. Among its members are

Founding Chairman Peter Grauer of Bloomberg, Warren Buffet, Larry Fink of BlackRock,

and Sheryl Sandberg of Facebook. They publicly champion their belief that increasing the

representation of women in corporate leadership roles is good for business and good for

the economy.

Investment firms are responding to growing interest by directing capital to higher

performing companies. In 2014, U.K.-based Barclays launched an exchange-traded note

based on an index of companies with female CEOs or directors (the latter with a threshold

of 25 percent). In the U.S., Bank of America and Morgan Stanley have similarly expanded

their product offerings.

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The global regulatory and legislative context puts additional pressure on voluntary

initiatives in the U.S. to produce results. Regulations and legislation with various

quantitative mandates and timetables to increase gender diversity on boards in countries

such as Belgium, France, Germany, Italy, Norway, and Spain are rapidly changing the

complexion of directors in those locations. A European Commission directive setting a

board quota of 40-percent by 2020 for the under-represented gender is currently pending

approval, and, among others, non-quota governance rules in Australia and Japan are also

underway. U.S. firms seeking to avoid similar movement toward quotas will need to show

that voluntary efforts can successfully increase diverse representation on boards.

UTILIZING SHAREHOLDER LEVERAGE TO ENCOURAGE BOARD DIVERSITY

Through dialogues, shareholder resolutions, and proxy voting communications, Walden

asks portfolio companies to foster greater board diversity over time by:

Strengthening Nominating and Corporate Governance policies and charters to

explicitly embed a commitment to diversity inclusive of gender, race, and ethnicity in

Board searches;

Committing to include women and minority candidates in the pool from which

Board nominees are chosen; and

Providing an annual assessment of challenges experienced and progress achieved.

Following engagement by Walden and our partners, numerous portfolio companies have added women and minority directors, amended corporate governance policies to explicitly recognize gender and racial diversity as a factor in the selection of directors, and committed to develop a diverse director candidate pool.

Walden’s multi-year engagement with technology company NetApp provides a case in

point. After first raising concerns with company management in 2012, NetApp agreed in

early 2013 to expand disclosure in its proxy statement that described the value of gender

and racial diversity on the board as well as specific steps it could take to build a diverse

candidate pool. The following August, a woman was nominated and elected to the

company’s board.

Simultaneously, Walden often seeks greater disclosure of equal employment opportunity (EEO) data on workforce composition as well as reporting on company

successes and challenges in hiring and promoting women and minorities to senior

management positions. Such disclosure brings increased public accountability that is

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undoubtedly an impetus for progress. Plus, every new woman or person of color in a

senior executive role is a potential director candidate, or two, down the road.

Forces from a variety of venues are coalescing to bring greater attention to the relatively

low level of gender and racial diversity in U.S. corporate boardrooms. Walden believes the

business case for improvement is clear. While progress is slow and uneven, we find ample

reason for optimism.

Walden Asset Management is a division of Boston Trust & Investment Management Company. The information contained herein has been prepared from sources and data we believe to be reliable, but we make no guarantee as to its adequacy, accuracy, timeliness, or completeness. We cannot and do not guarantee the suitability or profitability of any particular investment. No information herein is intended as an offer or solicitation of an offer to sell or buy, or as a sponsorship of any company, security, or fund. Neither Walden nor any of its contributors makes any representations about the suitability of the information contained herein. Opinions expressed herein are subject to change without notice.

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LEVERS OF POWER – GLOBAL INSIGHTS

FTSE 100 Achieves 25% Target

By Denise Wilson, Chief Exec., Davies Review Today we celebrate. Women now make up a quarter of all Board members in the FTSE 100. British business has hit their target of 25% women on the boards of FTSE 100 companies by the end of 2015, as set out in the 2011 independent Davies Review. It is a milestone event in the history of corporate Britain and one which frankly, many found difficult to imagine only four short years ago.

This signals a vital shift in the culture at the top of British business and near revolution taking place in the boardrooms of the UK's biggest companies. The ground swell of support from all quarters has been incredible, enabling many capable, credible women to take their rightful seat. Without the Davies Review and efforts of many business men and women across the UK, including Government, far too many women would still be patiently waiting in the wings for their turn at the top table. Our thanks go to FTSE Chairman and businesses large and small, who have contributed to today's success.

Since 2011, nearing 500 women have been appointed to the Boards of FTSE 350 companies and all male boards are no longer deemed acceptable in corporate Britain. When we launched the Davies Review under the Chairmanship of Lord Davies in 2011, there were 152 all male boards in the FTSE 350. Today there are no all male boards in the FTSE 100 and only 16 and dwindling, remaining in the FTSE 250.

This is real progress and what is more, progress has been achieved through an entirely voluntary, collaborative and business led approach. Britain's success, without the need for compulsory quotas, is the envy of many others counties who by any other means, have achieved far less progress.

Of course there is more work to be done and 25% is clearly not gender parity. However, it is a good start from a very low and stagnant base. And if progress is to be sustained into the future, the focus needs to now widen to increase the number of women in executive roles immediately below board level and to appoint more women as Chairs and Senior Independent Directors.

The Davies Steering Group, in conjunction with industry experts and key stakeholders, will now analyse progress, reflect on what has worked well and where

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more effort is required. A summary report, publishing our findings and recommendations for the next stage in the journey, will be launched at the end of October.

If Britain maintains its laser focus on this as a core business and talent management issue over the next five years, the next generation have every opportunity of consigning the boardroom gender equality debate, to it's place in the annals of history. An achievement worthy of celebration.

Link to Davies Report March 2015 https://www.gov.uk/government/publications/women-on-boards-2015-fourth-annual-review

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What Norway Can Teach the U.S. About Getting More Women Into Boardrooms

By Aaron A. Dhir, May 4, 2015 New research asks people living with the most ambitious corporate quota system in the world how they feel about it, and, it turns out, they feel pretty good. Men dominate the upper echelons of the business world: Women hold only 15 percent of seats on the boards of the S&P 1500, up a mere 3.7 percent over the last seven years. There are more directors with the first names James, Robert, William, and John than there are women directors. Just 2.8 percent of Fortune 500 directors are women of color. Confronted with similar disparities, a set of countries around the world—Norway, Italy, Belgium, France, Iceland, and Germany—have resorted to the force of law, adopting quotas that require corporate boards to maintain particular levels of gender balance. The law in Norway goes so far as to authorize the state to dissolve firms that do not comply. In my new book, published this week, I offer an in-depth study of this turn to regulation. In the United States, quotas may not be constitutionally, much less politically, viable. The debate, to the extent it exists, tends to rest on conjecture. But this need not be the case: Norway has had a compulsory quota for all publicly traded firms since 2008, making it the oldest such requirement. So what do those who live under the world’s most mature quota regime have to say about legally required gender diversity? To answer that question, I interviewed corporate directors in Norway—male and female—about their lived experiences both before and after the law came into effect. According to the participants in my study, the heterogeneity brought about by quotas has enhanced the quality of boardroom deliberations and overall corporate governance. The directors I interviewed believed that women were more likely than men to thoroughly deliberate and evaluate risks. Women, in their view, showed a greater propensity to monitor firm management. Many directors thought that women’s status as outsiders to the corporate boardroom, and the male networks that constitute it, contributed to their independence and introduced new perspectives born of different experiences into board work. These findings resonate with scholarly studies documenting that diverse groups tend to do a better job than homogeneous ones of tackling complex issues.

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But beyond the benefits to firm decision-making and governance, the quota law has also had a broader social effect by redistributing power in Norwegian society. Before the quota came into force, Norwegian board members were largely selected in the same way as they are in the U.S. today: by tapping into the networks of existing directors and executives. Not surprisingly, these networks tended to be male and insular. Further, the dominant perception among directors and officers was that qualified women did not exist. A wealth of social-science research has documented the assumption that men are more effective leaders than women. This unconscious bias only compounds the structural obstacles that keep women away from the boardroom table.

But the quota forced companies to extend their searches for new directors beyond the typical spheres; they had no choice but to look beyond their go-to networks. As one director told me, the quota compelled companies to expand their “one-dimensional picture of what [a] board member should be.” This included considering candidates who did not have prior CEO or C-suite experience, or directly related industry experience, but had analogous experience and transferable skill-sets and competencies from other professional domains. As a result, Norwegian society’s understanding of high-level leadership is changing, valuing a wider variety of backgrounds and experiences.

Many of the directors I interviewed told me that they initially opposed the quota law but have now come around after seeing the law in action and directly experiencing its effects. And yet, Germany’s recent decision to adopt a quota has once again reignited the controversy. Commentators in The New York Times and the Washington Post impugned the wisdom of positive discrimination, both relying on a 2012 study to argue that quotas harm firm financial performance and are inappropriate as a policy measure.

While this study found that the board restructuring required by the Norwegian quota led to a decline in firm valuation, the authors did not ascribe the decrease to qualities inherent to gender, but to the challenges of having more inexperience on the board. Many of the incoming females were less senior and less likely to have been CEOs, for example.

But as new female directors gain more experience, these costs are likely to diminish. More importantly, some initial value reduction—a one-time transaction cost—may be an acceptable trade-off for the longer-term benefits of gender diversity on corporate boards, which my research suggests may enhance the quality of corporate governance and promote broader social equality goals. And the negative performance effects

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could be mitigated through regulatory design. States, for example, could require a more gradual increase in gender representation than Norway did, beginning with initial lower targets and giving firms a more extended period to come into compliance.

Even if the worries about firm valuation can be addressed, quotas still present a variety of concerns worth engaging. Are quota regimes viable strategies in countries whose social and political cultures differ from Norway’s, or whose corporate governance structures differ? In Norway, a number of publicly traded firms turned private before the law came into effect, possibly to evade the mandate. If this is what occurred, how likely is it that companies in other places will follow suit? If women cease to be outsiders and become part of existing male networks, will they lose their valuable independence?

It will take more time to answer these questions with clarity. But for now, such questions are peripheral to the situation here in the United States, where quotas are an unlikely prospect and efforts to address the gender gap have been anemic at best, such as a 2009 regulation promulgated by the Securities and Exchange Commission that requires listed companies to disclose whether they take “diversity” into account when composing their boards and, if so, how. The rule does not define diversity and corporate America has given it a range of meanings. In my book, I analyze the disclosures submitted to the Commission between 2010 and 2013 by the S&P 100. My findings will not inspire confidence among those concerned with the gender imbalances I noted at the outset.

Though virtually all companies I studied complied with the rule, only half defined diversity to include socio-demographic characteristics such as gender or race. Instead, most firms construed diversity to entail diversity of background or experience. Ford Motor Company, whose board consists of two women and 14 men, submitted the same disclosure each year for the four years I studied: “Ford recognizes the value of diversity and we endeavor to have a diverse Board, with experience in business, government, education and technology, and in areas that are relevant to the Company's global activities.”

Even cursory reporting can amount to compliance. Berkshire Hathaway disclosed that it “does not have a policy regarding the consideration of diversity in identifying nominees for director. In identifying director nominees, the…Committee does not seek diversity, however defined.” Compliance thus does not require meaningful engagement with the diversity question.

There is of course no one-size-fits-all solution to the puzzle of corporate board homogeneity. While quotas might not be palatable in the United States, it is clear that

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a more forceful regulatory shove is needed to disrupt the status quo. There are many arguments for boardroom diversity but, in my view, one of the most important is that corporations can have as much, if not more, impact on our lives as government. Qualified women and other currently absent groups ought to be in the leadership of these sites of power.

Law is a powerful tool that can shape social norms, and we should not be afraid to use it to address the biases that infect our society. The integrity of our institutions depends on it.

©2015 Aaron Dhir, as first published by the Atlantic

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LEVERS OF POWER – REIMAGINING THE SELECTION PROCESS

The Time Is Now for Diversity on Boards

By Deborah Gillis, President & CEO, Catalyst According to Catalyst’s most recent Census, women held only 19.2% of S&P 500 board seats in 2014. Only 26.2% of companies had 25% or more women board directors, and 3.6% of organizations had zero women on their boards. These numbers are disappointing, but even more discouraging are the statistics on women of color in the boardroom. Catalyst’s recent report, Still Too Few: Women of Color on Boards, reveals that barriers to women’s advancement are especially persistent for women of color, who are projected to make up 53% of women in the United States by 2050, yet are nearly absent from most Fortune 500 boards. Women of color comprised only 2.8% of Fortune 500 board directors, and 25% of the women in that very small group served on multiple boards. In fact, women of color are twice as likely as white women to serve on multiple boards, as selection committees routinely turn to the same women of color to fill open board seats. This reveals a challenging Catch-22: in order to be nominated for a board seat, most boards expect women of color to have a record of board service already. Reliance on limited networks to fill board seats shrinks the pool of board-eligible women of color to a puddle—and reveals that all women, and women of color in particular, are not thought of as “the usual suspects” when it comes to filling board vacancies. Many gaps and barriers still exist for women of color at work, including lack of access to influential sponsors and exclusion from professional networks, as well as stereotyping and discrimination. We also know that these barriers and inequalities exist across levels, from women in entry-level positions to those at the very top. We’ll never achieve truly inclusive workplaces as long as women of color continue to face significant obstacles to leadership. And we won’t make progress if the issues facing women of color matter only to women of color. We need men of color, white men, and white women advocating for change and working together to improve lives, communities, and companies, creating environments where all people can thrive. To make real progress, we also need to start asking some different questions—questions that challenge stereotypes and force us to think about our leadership teams

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in a new light. Instead of asking why women, and women of color in particular, aren’t getting ahead, let’s ask: “What’s wrong with this picture? Why don’t our boards look like the world we live in? Why don’t they reflect the marketplace we serve?” And, most importantly, “What can we do to change this?” Diverse boards enhance public trust by representing the interests of a company’s many stakeholders, from its shareholders and suppliers to its employees, customers, and the residents of the communities in which it operates. Corporate boards in the United States and around the world must make a conscious effort to capitalize on the strength diversity can bring, as many have already begun to do. Disappointing data coupled with new momentum around this issue explain why initiatives to address women’s persistent underrepresentation on boards have been implemented in countries around the world in recent years, including in the United Kingdom, Canada, Norway, and Australia. These measures—which range from mandated disclosure of diversity policies, to voluntary initiatives led by business leaders, to self-imposed objectives to quotas for gender-balanced board representation—are motivated by compelling research which shows that gender diversity can benefit corporate decision-making and improve overall business results. By now most of us are familiar with the business case for advancing women to corporate leadership. We know why women are crucial to a board’s success; now it’s time to focus on how boards can attract the best talent of all genders, races, and ethnicities. Boards looking to diversify can disrupt the default by reaching beyond their regular network of contacts to find well-qualified candidates of different backgrounds. The good news is that it’s becoming less and less acceptable to have no women at all on a board—but we don’t want companies to get stuck in a “one and done” mentality. We need to prevent “one” from becoming the new “zero.” It’s our job to bring corporate boards in line with the present and the future. Doing so requires leadership, determination, and sustained effort. We have the power to take action in pursuit of a common goal: to spark meaningful change for all women in the workplace and around the world.

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Five Steps You Can Take to Increase Your Board’s Diversity By Bonnie W. Gwin, Vice Chairman, Heidrick & Struggles

Over the past five years, sitting and former CEOs and CFOs together claimed almost two-thirds of new appointments to Fortune 500 boards. While these executives clearly add a lot to the boardroom, this trend also means that diversity is limited – and not just ethnic and gender diversity but diversity of experiences as well. It is those different perspectives that often lead to new ideas, fresh perspectives and business value for a company. So how do you ensure a diversity of experiences and perspectives in your own boardroom? Here are five steps you can take: 1. Rethink your default setting. You don’t have to begin with the premise that the

ideal director must have CEO experience. CEOs certainly bring a lot of skills to

the table. But many outstanding GMs and divisional heads possess the same skills

that make CEOs such attractive candidates – strategic orientation, operational

ability, and P&L experience. You might also consider presidents of universities,

retired public servants who have led large government agencies, and retired career

military officers. They, too, can bring qualities of executive leadership and

experience in leading complex organizations that your board needs.

2. Consider top functional leaders. Many boards have been reluctant to bring on

executives with strictly functional depth, other than CFOs. But a director whose

functional experience is relevant to a key area of your company’s strategy can add

great value. If you’re in an industry where customer privacy, network security, and

business recovery are critical, your board should have the necessary expertise to

oversee cyber risk – expertise a CIO might provide. If you’re in a formerly

heavily-regulated industry facing unfamiliar marketing challenges, an outstanding

CMO could provide a much-needed customer-centric perspective. General

Counsels with deep M&A expertise can be valuable if your company is growing

rapidly through acquisition or is in a heavily regulated sector.

3. Catch a rising star. By searching diligently, your board can also find younger

executives on the fast track to the top. As a group, they’re generally more diverse

than in the past and they will furnish many of tomorrow’s CEOs. Large US-based

companies known for best practices in talent development are a good place to

start. But because other boards are likely to look to these kinds of high-profiles

companies first, you will face fierce competition for those who are genuinely

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qualified for board service. But there are many, less well known but equally

impressive businesses with up and coming general managers on the CEO or

similar track whom you can and should consider.

4. Don’t rule out well-run private companies. Traditionally, many boards have

been unwilling to look to private companies for board candidates. Private

companies are sometimes seen as too small and too narrow to generate the scale

and scope of experiences relevant for service on the board of a large, publicly-

traded company. But the surge in private equity investment has been accompanied

by the recruitment of strong public company trained leaders to the private

company sector. And some dynamic private companies are adept at developing

leadership skills and follow the same public company governance models you do.

5. Insist on a diverse slate of candidates. The full board can and should require

your Nominating Committee and its search firm, if you engage one, to present

diverse slates of candidates for director openings. The full board can also review

the criteria for new board members, considering not only diversity of gender and

ethnicity, but also of geography, skill sets, industry background, and other

experiences. This should enable you to look beyond CEOs and “well-rounded”

directors for candidates with specific skills who can contribute directly to the

strategic needs of the business.

Often, non-traditional candidates are seen as risky. But there is enormous risk in not diversifying your board. With a disciplined search process, you can create a more diverse board without courting risk. But you will have to make some extra effort in sourcing and assessing qualified candidates. The Nominating Committee may need to add the question of readiness to assessment and reference more extensively the farther they depart from traditional candidates. And mentoring/onboarding is even more important for the first time director. None of those steps is particularly difficult. They require only the will to undertake them and due diligence in carrying them out. And in the long run, the extra effort is likely to deliver far more value to your board and the company than if you simply remain with the status quo.

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Board Gender Diversity: A Governance and Career Advantage

By Deborah DeHaas, vice chair, national managing partner, Center for Corporate Governance and chief inclusion officer at Deloitte LLP.

In a globally interconnected world, where stakeholders are more diverse than ever, board and management diversity are essential for organizations to thrive in the current business environment. However, while many organizations are advocating for enhanced board composition overall, there is still some work to be done to achieve a real gender balance, as less than one in five women currently hold board seats, according to Women in the Boardroom: A Global Perspective, a report compiled by Deloitte Global Center for Corporate Governance.1

Increasing the number of women on boards has been slow in the United States compared to some European countries. The organization, 2020 Women on Boards, whose goal is to have 20% women director representation by 2020, indicates that the percentage of women on Fortune 1000 U.S. boards rose to 17.7% in 2014, from 16.6% in 2013.2

In contrast, the average share of female directors serving on the boards of the largest listed companies in Europe reached 20.2% in October 2014, according to the European Commission’s women in economic decision-making database—an increase of 11.9% from 2010, when the issue was first put on the table.3 Today, there are only four countries in the European Union where women account for at least 25% of board members—France, Latvia, Finland and Sweden—and France and Sweden, among other EU countries, have proposed legislation to specify quotas. Recognizing the importance of diversity, a number of boards have set their sights on expanding gender diversity. Board composition was named one of the top priorities in 2015 by 36% of the 250 companies surveyed for the 2014 Board Practices Report: Per-spectives from the Boardroom, a publication from the Society of Corporate Secretaries & Governance Professionals in collaboration with the Deloitte LLP Center for Corpo-rate Governance. The report noted that “amid pressure from shareholders, boards should consider placing greater consideration on recruitment efforts, particularly on recruiting diverse board members (e.g., diversity of thought, race and gender) while also considering director tenure and how it influences overall board composition and independence.”

Corporate boards looking to add women to their ranks might need to open their aperture to see the benefits, forward-looking views and skillsets that gender diversity could bring to boardroom discussions. Numerous studies have found that companies with women on their boards outperform those with less gender diversity in terms of

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share price and performance, as well as certain financial metrics, including return on equity. Other studies have found that having more women on boards and their impact on decision-making can enhance shareholder value.

When assessing candidates, boards should consider looking at skills, and not necessarily titles, given that women hold less than 5% of the Fortune 500 CEO positions. Traditional thinking on board composition was that a director needed to have been a sitting CEO or another highly ranked C-suite executive. That view is changing, particularly as organizations have begun to limit the number of boards that their own CEOs can serve on. As a result, there are fewer corporate CEOs now available to sit on boards, which hopefully will encourage organizations to consider a wider pool of candidates. And as boards become more comfortable with considering a business unit CEO as a candidate, or a private company CEO or a CFO, that has widened opportunities for more women candidates.

What’s at risk with keeping to the traditional methods of board recruitment and related outcomes? First, there could be a lack of board members with diverse experiences and views on emerging critical issues, such as cybersecurity, social media, international markets, analytics and recruiting new generations of talent. Second, the board could miss having a pulse on the trends and demographic changes that could have an impact on the organization’s corporate strategy and business model. Third, there might not be the thinking, voice and perspective of those who are influencing the organization’s future direction and shareholder value.

For those women who seek board positions, they should have a clear vision of what they seek from the companies they’re targeting for board-level opportunities. A company’s cultural fit should be a main consideration, which goes for anyone seeking a board position. In addition, women wanting to join a board should understand how their expertise, experiences or attributes would make them viable candidates.

It’s also important for women who aspire to be on boards to expand their personal networks and build a diverse set of relationships. At the same time, it’s important to create opportunities for others outside of their organizations, as relationships with those individuals may one day translate into opportunities in the boardroom.

Women should also make others aware of their interest in serving as a director, but in a strategic way and at the appropriate time. Just raising a hand and asking for a board position may not be the ideal way to get noticed. Rather, women executives may want to ask other senior board members and business leaders for advice on how to position themselves for a board and recognize that it may require first spending time either on private company or smaller boards so they are better positioned for a larger public company board.

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Women who are looking at a potential director position should consider the cultural dynamics in the particular board room being considered. Does the company have a culture where a new director, and potentially a woman director, is going to be able to have a voice, be accepted and be successful? It’s important to understand how the board operates, how the committees work and how decisions are reached. It will also be important to meet other members of the board and management to assess the cultural fit as well.

Finally, it is critical to understand the current situation of the company and any unique or significant risks that either the company or the industry it resides in faces today. Prospective board candidates should thoroughly review all available public information, including financial filings and analysts’ reports, before taking on a board role and should feel confident that their experiences and skills would allow them to be a highly effective and contributing board member of that organization.

—By Deborah DeHaas, vice chair, national managing partner, Center for Corporate Governance and chief inclusion officer at Deloitte LLP.

Endnotes

1. Women in the Boardroom: A Global Perspective, Deloitte Global Center for Corporate Governance, Deloitte Touche Tohmatsu Limited, 2015, p 33

2. 2020 Women on Boards, 2020 Women on Boards Gender Diversity Index, 2014

3. European Commission, database on women and men in decision-making, January 2015

This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional adviser.

Deloitte is not responsible for any loss sustained by any person who relies on this publication.

As used in this document, “Deloitte” means Deloitte LLP and its subsidiaries. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

Member of Deloitte Touche Tohmatsu Limited

© 2015 Deloitte Development LLC. All rights reserved.

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Galvanising the Diversity Triangle

By Carol Rosati, Director & Global Head, Inspire Over the last six years, there has been much deliberation about the need to improve the gender balance of our workforce. It continues to challenge most organisations and is a highly complex issue, woven into the very fabric of our worldwide culture and society. Working in the recruitment industry, at the forefront of this debate, I have seen corporate culture and behaviour change radically. Over the last 25 years, progress has been made in terms of men and women working effectively together and the awareness of the unique value women bring is growing. However the gender imbalance from middle management upwards remains, and women are still seemingly encountering barriers to stop them reaching senior management in their organisation. Executive Search firms, organisations and women themselves all have an equally important role to play, and all three are fundamentally affected by the unconscious bias our society and its accepted code of conduct has engendered. Search firms have a responsibility to produce balanced shortlists and find suitably qualified female candidates. The Consultants have to be willing to challenge their client's brief or the required skills, but ultimately clients are the final decision makers and they are the ones who have to make the changes. Historically job descriptions and briefs have focused on predominately male-orientated attributes, making a balanced shortlist even less likely. But as our Inspire and Aspire networks demonstrate, there are many talented women out there and recruiters need to be prepared to look beyond the obvious to find the exceptional. Despite all of these efforts, a highly skilled and capable woman may say no to a role, as she believes it presents insurmountable obstacles, such as frequent overseas travel, which wouldn't enable her to manage both her professional and family life or other commitments. The recruiter or researcher often accepts "not interested" at face value and does not explore this further to get to the real root of the issue. By failing to address this, with either the female candidate or the client, the opportunity is lost to shape the role and make it possible. Instead, many choose the easier option, which in numerous cases involves producing a shortlist of men. As a general rule, rightly or wrongly, men are still viewed as being able to make a full and strong commitment to work, whereas women are often viewed as facing competing priorities, particularly at a senior level.

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Consultants must understand the needs of the candidates in greater depth. If they truly believe they have found the right person for the role they must act on behalf of both the candidate and client alike to find a suitable solution. They must be brave enough to have these challenging discussions with their clients. However we must also be mindful that not all hires are made by recruiters, so this is only part of the equation. Even if more balanced shortlists are presented, unless changes are made to the client side the outcome will remain the same and fewer women will be appointed. The reasons range from individuals recruiting in their own likeness, choosing someone they are comfortable with, to the aforementioned male oriented criteria. The diversity agenda needs to be led from the top; change comes with buy-in from senior management. Engaging more male champions is critical as they currently hold the influence to make this change. However, the preference for men that still prevails is also down to women themselves. Feedback from clients highlights, that some women are not performing or representing themselves as well as the male candidates, leading the individuals making the appointment to believe the men are stronger candidates, more suitable for the role in question. If businesses are serious about improving the gender balance at the top of their organisations, they need to ensure that the interview panel is diverse, and includes at least one senior woman, and possibly even a diversity leader who can offer a balanced view. They need to understand that women have a tendency to under-sell their achievements and experience, whereas men may well over-sell theirs in order to get the job. It is also important to reflect on the skills that are needed in the role as the "softer" skills associated with women are often given less credence, but are actually essential components. The third element is women themselves. Whether it’s nature or nurture or societal pressure, the very attributes, which are seen as positive in a man, are viewed as pushy and aggressive in a woman. As a result women tend to avoid the spotlight and don't wish to appear boastful. Men make themselves visible in their organisations and to possible sponsors, often from the very outset of their careers. Sponsorship is an imperative element to the success of any executive, and must be earned. If women want to access the same opportunities, they must learn to do the same.

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When interviewing women, it is very common for them to mention their most outstanding achievement only in passing towards the end of the meeting, whereas it is usual for men to have shared all of theirs within the first 25 minutes! Women can certainly take a leaf out of men's books and learn to communicate more effectively, highlighting their skills and being clearer about their requirements, rather than assuming they will be judged on their merits and that the quality of their work speaks for them. Each corner of this equilateral diversity triangle is linked to the other and has a key role to play in increasing the number of women in senior roles and keeping the talent pipeline strong. By being aware of the deep-rooted beliefs and behaviours, which affect and drive our decision-making processes, we can influence change and make real progress.

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LEVERS OF POWER – ENGAGING THE PUBLIC SECTOR AND THE PUBLIC

Opening the boardroom door to more women: Employing demand side strategies that fit in the U.S.

By Charlotte Laurent-Ottomane, Executive Director, Thirty Percent Coalition In order to accelerate the glacial rate of progress in diversifying corporate boards, it is essential to forge a public-private collaboration that addresses the demand side of the board nomination process. Strategies that leverage the financial and political clout of individuals and organizations dedicated to increasing the representation of women on United States corporate boards offer hopeful prospects for creating the meaningful change missing from the domestic landscape. For more than 15 years, efforts to advance more women to corporate boards have concentrated on: 1) tracking and reporting on the numbers of women in leadership positions; 2) researching and advocating best practices and the business case for gender diversity on boards; 3) enlarging the pool of women qualified to be directors through special training and mentoring; and 4) making qualified women more accessible to companies seeking board diversity. These efforts have been valuable, both in the U.S. and abroad. However, after some encouraging initial increase in the number of women on boards in the U.S., the pace of change in recent years has essentially stalled. Faced with this situation, governmental officials, business leaders and other influential advocates in a number of other countries took a different approach: using governmental action and quasi-governmental initiatives to directly (e.g., by mandated quotas) or indirectly (e.g., by required public reporting) make public companies increase board gender diversity. The results have been dramatic, most notably in European countries. There is a general acknowledgement that the quota strategy is not a viable way to increase the number of women in the U.S. corporate boardroom. And to date, American stock exchanges have shown no interest in emulating the “comply or explain” disclosure practices adopted by their counterparts in Australia and Canada. The proxy disclosure rule enacted by the Securities & Exchange Commission in 2009 (requiring disclosure of any policy regarding board diversity but failing even to define that term) has had little or no effect in company boardrooms.

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However, there is growing recognition in the U.S. that it is necessary to identify and employ strategies that affect the demand side and will influence corporate boards to actively recruit and appoint women directors. As SEC Commission Chair Mary Jo White said in her remarks at the 2014 SAIS conference (later published in InvestmentNews): “The challenge is not a lack of suitable candidates. There is adequate supply, but the challenge is creating real and committed demand.” This is the mission of The Thirty Percent Coalition, which was founded in late 2011 to address the challenge of creating demand in ways that are relevant to U.S. practices. The Coalition is unique in several respects: it focuses solely on the demand side of board diversity – influencing corporations to strengthen their efforts to increase the number of women directors; it is limited to gender diversity on boards; and it brings together a broad coalition of some 80 senior business executives, institutional investors, professional services firm representatives, government officials, and women’s and nonprofit organizations to use their collective influence to open the corporate boardroom door here in the U.S. for the many qualified women waiting to walk through. At its inception, Coalition members identified three key sectors with the “clout” to affect the demand for women directors in the U.S. The Coalition's three committees each pursue strategies related to the sources of power in those sectors: the financial power of institutional investors, the public policy power of government, and the persuasive power of corporate leaders. A Committee of Institutional Investors, joined by some who are not Coalition members and representing over $3 trillion in assets under management, has reached out to companies in the Russell 1000 with no women directors. Through letters and conversations and, in some instances, shareholder resolutions, members of this Committee have engaged in collaborative conversations with company leadership resulting in changes to corporate governance charters. To date, 24 companies have elected women to boards that previously had been all male. The Public Sector Initiatives Committee is working with key Coalition members and other public officials to support a number of cities and states that have passed or are considering resolutions (e.g., California, Illinois, Massachusetts) that encourage diverse gender representation on corporate boards of directors and executive orders or ordinances (e.g., Philadelphia) that require bidders for public contracts to disclose board diversity data and report on plans for improvement. State and city government officials who control pension funds are also engaged in institutional investor efforts, outreach to the SEC, and developing policies to vote no on non-diverse boards.

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The Corporate Leaders Committee is working to enlarge the growing group of business leaders who are using their influence to publicly advocate for change and privately talk with their peers. A core group of Champions of Change (CEOs, Board Chairs, Lead Directors and Chairs and members of nominating committees) has developed a Charter of beliefs and commitments that give a roadmap for other corporate leaders to follow. Corporate executives in key positions like Chief Diversity Officer and General Counsel also have the ability to influence not only their own boards but also their peers in other companies, sharing strategies for increasing board diversity. Efforts are underway to mobilize them as well. While we believe that the supply side initiatives need to be sustained so that more of the women entering the workforce today will be tomorrow’s leaders and that continued research and reporting also is important, we know that only demand side strategies appropriate to the U.S. environment will ensure that tomorrow’s women leaders will populate corporate boards in much greater numbers.

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LEVERS OF POWER: ENGAGING FAMILY OWNED COMPANIES

The Growing Influence of Family-Run Companies – and What It Means for Women in the Boardroom

By Susan Stautberg, CEO, WomenCorporateDirectors Despite all the media focus on public companies, the reality is that large, privately-held businesses are growing in their influence, having repercussions on their governance and what is needed in the boardroom. Here are the facts: Big does not equal “public”; five out of six firms in the United States with more than 500 employees are privately-held. Large, privately-held companies are also growing at a faster rate than public companies in the U.S., and are generating higher profit margins. And fewer companies are even choosing the public route: the number of companies listed on NYSE and NASDAQ in the U.S. has fallen in recent years – from 7,000 in the year 2000 to about 5,200 today. This is what is happening just in the U.S., but the influence of private companies is even greater proportionately when you look at companies on a global scale:

Family businesses control a huge share of the economy and public mindshare – in the U.S., but especially around the world: From Walmart, News Corp, and Ford, to Samsung, Fiat, and BMW. One-third of all companies in the S&P 500 index and 40% of the 250 largest companies in France and Germany are family-controlled.

Family-controlled firms make up 19% of the Fortune Global 500 – up from 15% in 2005. The growth of family firms at this scale illustrates their impact as large, multinational organizations.

Family businesses are the backbone of the Asian economy – representing 85% of the companies in Asia-Pacific. Family companies have been the key engine driving the remarkable growth of the economies in South Korea, Thailand, Indonesia, and more. The Tata Group alone – the largest family business in Asia – employs 450,000 people.

Latin America is also heavily dominated by family-run firms: 75% of the $1-billion-plus businesses in the region are family-run.

Private firms are driving growth in more unexpected places: Even in China, synonymous with state capitalism, private companies are driving China’s

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growth. In 1978, the gross industrial output produced by Chinese state enterprises was 75% and today, in 2015, is only 25%.

As companies are competing with everyone, everywhere, they require the best people, not best friends, in the executive suite and at the boardroom table. This opens up opportunities for qualified women in the leadership ranks, especially as control of family companies passes from one generation to the next. Forty percent of current leaders of family-owned firms will retire in the next five years, and the generation to whom the torch is being passed has completely different expectations as to who will be running things. There is no longer the universal presumption that sons will inherit the mantle, as even regions such as the Middle East and Africa are seeing women take on this role. In fact, the percentage of women taking over the management and ownership of family firms has greatly increased in the last two decades. In 1994, only 2% of CEOs in family businesses were women; currently, 11-12% of family business CEOs are women. There is also increased pressure in family companies to bring in independent directors. Although family members themselves will still hold the reins, there is a growing call for independent, non-executive directors to be placed in family business boardrooms, to increase accountability, broaden the experience base, and lend an outside perspective. The greater need for diversity in the boardroom of family companies has prompted us at WomenCorporateDirectors to expand our programming around family-run firms – helping provide governance resources and insights for the family business owners as well as the directors of the family companies. The WCD Family Business Council, established last year, is taking on a number of initiatives, including:

Exploring issues, including CEO and board succession, talent management, strategic assets family members bring to the business, the benefits of family councils and other methods of developing multi-generational success.

Creating new programs for women CEOs and directors of family companies aligned with the WCD Global Institute as well as its regional Institutes in Asia, Europe, and the Americas.

Performing research with executive search consulting firm Spencer Stuart, Professor Boris Groysberg of the Harvard Business School, and organizational behavior expert Deborah Bell to identify specific skills needed for family/private-owned company board service, as well as the particular challenges faced by these businesses today.

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Making director introductions – both for family business seeking outside directors and for family business leaders looking to broaden their experience through public company board service.

Additionally, WCD held its inaugural Family Business Governance Institute in the spring of 2015, bringing together directors of family companies into discussions around key family business issues. At the Institute, WCD joined with KPMG LLP to launch a new report from the WCD Thought Leadership Council: Enduring Across Generations: How Boards Drive Value in Family-owned Businesses. The high demand we are seeing for these kinds of programs underlines the growing need in family companies for getting out of the “business as usual” mindset. These companies and their boards want to embed better governance practices to make them more competitive in this highly-connected global market. Very few family businesses survive into the third generation and beyond, and ultimately, these companies not only want to survive, but have their legacy endure for many generations to come.

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ABOUT THE CONTRIBUTORS

Deborah L. DeHaas has been the Chief Inclusion Officer of Deloitte LLP since

April 2012. Ms. DeHaas served as Regional Managing Partner of Central Region at

Deloitte LLP from August 2011 to July 2013. She was also Midwest Regional

Managing Partner of Deloitte & Touche LLP.

Aaron A. Dhir is an Associate Professor (with tenure) at Osgoode Hall Law School

of York University. He is the author of Challenging Boardroom Homogeneity:

Corporate Law, Governance, and Diversity (Cambridge University Press, 2015).

Deborah Gillis is President & CEO of Catalyst, the leading nonprofit organization

working to change workplaces and improve lives by advancing women into business

leadership. Her distinguished career at Catalyst includes leading the organization’s

global growth strategy and expansion into India, Australia, and Japan.

The Honorable Deborah Goldberg was elected treasurer of the State of

Massachusetts in 2014. Ms. Goldberg served for six years on the Brookline Board of

Selectmen, including two as its Chair. Prior to her career in public service, Ms.

Goldberg worked in retail operations, buying and consumer affairs at The Stop &

Shop Companies, Inc.

Peter T. Grauer is Chairman of Bloomberg L.P., a global financial information and

media company. A board member since 1996, he became Chairman in 2001,

succeeding Michael R. Bloomberg, and then Chairman, President and CEO a year

later. He is Founding U.S. Chair of the 30% Club, a Member of the Advisory Council

of Out on the Street, and the McKinsey Advisory Council.

Bonnie W. Gwin is vice chairman and managing partner of Heidrick & Struggles’

Board Practice in North America. She is also currently a member of the Georgetown

University board of regents; on the board of trustees of Chautauqua Institution; and

previously served as chairman of the Make-A-Wish Foundation of America.

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Charlotte Laurent-Ottomane co-founded the Thirty Percent Coalition in late 2011

and serves as its executive director. Ms. Laurent-Ottomane leads and supports all

strategic initiatives of the Coalition, working with Committee Chairs and Coalition

members dedicated to achieving the mission of increased gender diversity in the

corporate boardroom.

Laura Liswood is a senior advisor at Goldman Sachs and was previously

managing director of Global Leadership and Diversity. She is also co-founder

and Secretary General of the Council of Women World Leaders, and directed the

Women’s Leadership Project from 1992-1996.

Rodney O. Martin, Jr. is chairman and CEO of Voya Financial. He joined Voya

(formerly ING U.S.) in 2011, and led it through an initial public offering (IPO) on the

New York Stock Exchange (NYSE: VOYA) in May 2013. Since then, he has overseen

a significant financial, operational and cultural transformation within the company.

Michael Milken is a businessman and philanthropist. He is the current chairman of

the Milken Institute.

Susan Ness is founder and chair of the SAIS Global Conference on Women in the

Boardroom. She is a Senior Fellow at the SAIS Center for Transatlantic Relations and

served on the Federal Communications Commission from 1994 to 2001. She serves

on the board of TEGNA, Inc (formerly Gannett Co), and Vital Voices Global

Partnership.

Carol Rosati is the founder of the global board networks Inspire and Aspire, which

connect over 5000 senior businesswomen worldwide. She is a Director and member

of the Board Services Practice at Harvey Nash Executive Search. She also sits as an

independent non-executive director on the remuneration and nominations committee

for Southern Housing Group.

Timothy Smith serves as the Director of ESG Shareowner Engagement at Walden

Asset Management. Mr. Smith joined Walden in 2000 and previously served as

executive director of the Interfaith Center on Corporate Responsibility (ICCR) for 24

years.

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Heidi Soumerai is director of environmental, social and governance (ESG) research

and is a member of the Board of Directors of Boston Trust. She is a member of the

ESG Research & Engagement Committee and is chair of the Corporate Governance

Committee, which establishes and implements Boston Trust and Walden’s proxy

voting guidelines.

Susan Stautberg is a Co-founder and Global Co-chair of Women Corporate

Directors. Ms. Stautberg serves as President of PartnerCom Corporation and also co-

founded OnBoard Bootcamps. She has been a Member of The Board of Directors at

National Association of Corporate Directors since July 2011.

Denise Wilson is Chief Executive of the UK Davies Review for Women on Boards

in and a Non-Executive Director of Ecclesiastical Insurance Group, Chair of the

Remuneration Committee and Audit Committee member. She is Chair of the Royal

Academy of Arts Friends Board, a Trustee on All Churches Trust and executive coach

to business leaders in the corporate and charitable sectors.

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