If you’re a woman in business, how do you go about joining the ranks of that most exclusive of clubs — corporate boards of directors? And what are the benefits — and challenges — that come with board membership?
Those questions were at the heart of a recent panel discussion for Stanford Business School female graduates organized by Women’s Initiative Network (WIN), an organization for Stanford students and alumnae. Titled “How and Why to Join a Board,” the sold-out March 12 event, held in the New York City offices of American International Group, covered subjects from why women might want to join a board to the typical duties of a director.
“Board membership is a great mechanism to help alumnae boost their network, to remain involved in their field while temporarily out of the workforce or in retirement, or to give back to the community,” said Nicole Sermier, MBA ‘05, who organized the event.
The topic is a pressing one for Stanford graduates as well as businesses as a whole. According to recent surveys by the Stanford GSB Alumni Association, about 46 percent of male GSB graduates have served on for-profit boards compared to just 14 percent of women. Nationally, women hold about 14.8 percent of board seats in Fortune 500 companies, up from 10.6 percent in 1997, according to Catalyst, a New York-based research group that focuses on women in business.
That slow rate of change, however, may fail to convey the good news, according to the panelists. “There’s never been a better time for nontraditional candidates who want to serve on for-profit boards,” said Julie Daum, North American board services practice leader for Spencer Stuart, the New York-based executive search firm. Over the past three years, one third of the new directors appointed to join boards of S&P 500 companies have never served as a corporate director before, she said.
Why the turnover? One reason is a dramatic change in the search process for board members. CEOs used to do most of the interviewing and hiring of prospective board members, but the Sarbanes-Oxley Act of 2002 put pressure on governance committee members to take control of the nominating and hiring of fellow directors. Also, fewer CEOs — the traditional candidates for membership — now choose to join boards. In addition, over the past decade or so, directors have stepped up efforts to hire women and minorities. “The traditional old-boy network has lessened as companies have introduced new kinds of people into the process,” Daum said.
But getting tapped to be a board member isn’t as straightforward as, say, applying for an executive position. “It still takes place behind closed doors,” Daum said. She advised women first to assess realistically whether they have the appropriate experience. Generally they should have experience running a unit or division of a company “coming as close to a CEO as they can get.” Companies also need expertise specific to their industry. A retailer, for example, might seek someone with experience in supply chain logistics. As important, however, is making yourself visible so that your name is more likely to come up during a board search. Daum suggested that women talk to bankers and lawyers who act as advisors to corporate boards to let them know they’re in the market for a board spot.
Before accepting an offer, women should seek answers to a few key questions, suggested another speaker, Debra Perry, a board member of MBIA Inc., Conseco, and Korn/Ferry International. First, they should determine that the company is financially sound and the board isn’t viewed as weak or ineffective. That can be done, in part, by looking at research from credit-rating firms and at the Form 10k, a detailed summary of a company’s performance submitted annually to the Securities and Exchange Commission.
There’s also the matter of whether the board and management are ethical. Studying financial statements, as well as press stories and the company’s record of regulatory and customer complaints, can help. In addition, Perry said, “The quality of communication among directors is important.” That’s especially key for “nontraditional” members, because other directors, who tend to be men in their sixties, may not have much experience dealing with women as colleagues rather than as subordinates.
Director wannabes also should consider the challenges they’re likely to face. For one thing, if the company is in a crisis, the time commitment can go from “eight meetings a year to teleconferences held more than once a week,” Perry said. Board members also face the potential of litigation related to their board service, and need to understand the limits of their responsibilities: No matter how much they may want to jump in and fix management problems, they’re supposed to act purely in an oversight capacity. And, if the company receives bad press, Perry said, “You put your own reputation at risk.”
What’s the payoff? For Perry, it has been meeting “a group of extraordinary and accomplished people I never would have met otherwise.” She also pointed to the opportunity to address challenging, high-level business problems.
Heidi Stamas, manager of board recruitment for Robin Hood Foundation in New York, also discussed opportunities for women interested in serving on nonprofit boards. At Robin Hood, as at many similar organizations, the application process is a lot easier than it is at for-profit counterparts. Interested candidates fill out a brief questionnaire and then are matched up with one of the 240 organizations funded by Robin Hood. Board members usually are expected not only to help with fundraising but also to offer a skill that can push organizations to the next level. Said Stamas: “With your expertise, you can help them raise their game.”
