Changes will bring woman oards: research shows that geography and industry account for considerable discrepancies in the prevalence of women directors, as does company size. But trends are favorable for more women joining corporate boards.

Heishtened emphasis on sound corporate governance and new regulatory requirements are creating incentives and opportunities for companies to tap into the underutilized pool of female talent for board seats. Requirements for financial experts, in particular, are boosting demand for CFOs and other individuals with financial management expertise as directors.

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Women's access to boardrooms in U.S. companies has lagged far behind their increasing roles in the economy as consumers, employees, investors and business owners. Women outnumber men in the population, account for almost half of the workforce and are responsible for over 80 percent of all purchases of goods and services. They make up over 45 percent of all investors, and they own over 10 million companies, which account for over 45 percent of all U.S. firms. Yet, the boardrooms of many companies remain off limits to women.

Catalyst's 2003 Census of the Fortune 500 shows that women hold 13.6 percent of all board seats, and that 10.8 percent of these companies have no female directors. Regional reports on women directors--conducted in 2003 in the Atlanta, Boston, Chicago and Philadelphia areas--report even lower representation. In these areas, women comprise between 7 and 12.4 percent of corporate directors; the proportion of companies without a woman on the board ranges from 10 percent in Chicago to 50 percent or more in the Atlanta and Boston studies (see Tables 1 and 2).

There are also large differences geographically as to whether companies have more than one woman director. Nationally, almost half (47.6 percent) of Fortune 500 companies have two or more women board members. In the Chicago study, 44 percent of the companies have more than one, followed by Philadelphia at 28.3 percent, Boston at 19.0 percent and Atlanta at 10.3 percent.

The Fortune 1000

Company size is a critical factor in the extent to which women are present in the boardroom. Larger companies, on average, have a greater number and greater share of women board members than do smaller companies, and are more likely to have more than one woman director. Regional differences are, thus, expected in the overall results on women directors, depending on the number and sizes of companies based there.

Fortune 1000 companies provide a good benchmark for inter-regional comparisons. Segmenting the upper and lower 500 companies on this list, all of which had annual revenues of over $1 billion in 2002, also demonstrates the key role firm size plays in women's access to the boardroom.

Philadelphia has the highest proportion (16.8 percent) of board seats held by women in Fortune 500 companies (see Table 1). Nationwide, and in the other three regional studies, women hold between 12.4 percent and 13.6 percent of board seats in Fortune 500 companies. Each region shows a significant drop in the share of women board members for companies in the second tier of the Fortune 1000.

The impact of organizational size on women's presence in the boardroom is even more sharply demonstrated by looking at companies with no women directors (see Table 2). The majority of all public companies in Georgia, the scope of the Atlanta study, have no women directors, yet just 7 percent of the Fortune 500 companies headquartered in the state lack female directors. Similarly, while half of the 100 largest public companies in Massachusetts (the base of the Boston study) have no women directors, 90 percent of the Fortune 500 companies headquartered in the state have at least one woman on their board.

Boards in the Fortune 501-1000 are more likely to be all-male than are those of Fortune 500. In each of the four regions, more than one-quarter of the Fortune 501-1000 companies have no women directors. The difference is particularly striking in the Philadelphia area, where all the Fortune 500 companies have at least one woman director, but over 40 percent of those in the Fortune 501-1000 have none.

Women Directors by Industry

Women's presence in the boardroom also varies by industry (see Table 3). In the Atlanta study, for example, all public companies in the utilities and insurance industries have at least one woman on their board, whereas none of the companies in the healthcare sector have one. In Massachusetts, the medical devices industry has the largest share (71 percent) of companies with one or more woman directors, while over half of the public companies in the services, manufacturing/industrial and technology sectors have none.

Overall, these regional studies show the public utilities, financial services and insurance industries to be among those sectors with the highest percentage of companies having women directors. In contrast, the technology and manufacturing/industrial sectors have many companies with no women directors.

Financial Experts and Boards

The growing emphasis on corporate accountability and the need for financial experts on the audit committees of public companies by 2004 is increasing demand for directors with financial and accounting expertise. Change is already taking place. Spencer Stuart's Board Index for 2003 shows, for instance, for the S & P 500:

* 10 percent of new outside directors have CFO or financial management expertise, up from just 1 percent in 1998.

* 16 percent of new audit committee board members are active or retired CFOs, compared to 5 percent a year earlier.

* 5 percent of newly added directors have accounting backgrounds.

* 80 percent of the companies seeking directors with a specific background were looking for financial expertise, up from 28 percent in 2002.

Women CFOs are still relatively scarce among large U.S. companies, and change has been slow. According to Catalyst, 7.1 percent of Fortune 500 CFOs were women in 2002, compared to 5.6 percent in 2000--below the figures for women in top management positions more generally. Catalyst reports that women represented 15.7 percent of corporate officers in 2002, up from 12.5 percent in 2000 and from 8.7 percent in 1995.

Women with accounting backgrounds may also qualify as financial experts. According to the CPA Personnel Report, women comprised 13.2 percent of the partners at the top U.S. accounting firms in 2003, up from less than 5 percent in 1992. To date, these women have rarely been considered for board positions. More generally, women comprise more than half of all auditors and accountants, and of all financial managers in the U.S.; some of these women also have the real world financial experience and expertise needed to meet the new standards.

Time for Change

There is growing consensus that corporate boards should be "strategic assets" of organizations, diverse in terms of talent, expertise and professional and personal backgrounds. Directors that reflect the various constituencies of companies and that come to the table with different backgrounds pose different kinds of questions, ask about untapped markets and provide new ways of thinking about issues. Canadian research also shows that diverse boards are more likely to tackle issues of ethics, conflicts of interest and board assessment than are more homogeneous boards.

Many companies lacking women directors operate in markets dominated by women as customers and employees. Some, for instance, manufacture women's shoes and washing machines; others sell everything from ice cream to financial services; others manage nursing homes.

More generally, as women write over 80 percent of all checks, account for over $5 trillion a year in consumer and business spending and represent almost half of all investors, it is increasingly easy to make the case that having women in the boardroom makes good business sense.

Regulatory requirements, such as those for board independence and financial experts, further support the need for broadening the pool of board candidates. Women can make excellent candidates for "independent" directors or financial experts; in addition, the number and share of women CFOs and partners in public accounting firms is rising, and the pipeline of women in finance and accounting positions is large and growing. Moreover, boards are placing increasing value on functional expertise as they strive for strategic advantage.

Women offer a wealth of expertise in areas such as technology, marketing and human resources (including compensation), vastly broadening the pool of qualified board candidates beyond the traditional pool of active and retired CEOs. Furthermore, the increasing time commitments and responsibilities of board members, stemming from Sarbanes-Oxley and other regulations, are driving down the average number of boards on which CEOs and others are willing to serve, providing more opportunities for new faces in the boardroom.

The SEC's mandate that public companies begin disclosing nominating committee processes for identifying and evaluating board candidates also bodes well for women. The traditional informal process of depending on recommendations from current directors produces a limited pool of candidates, most of whom share characteristics with incumbents, is giving way to broader search efforts spearheaded by nominating committees.

Board searches, especially at larger companies, increasingly involve executive search firms. In addition, several women's organizations--such as The Boston Club and professional organizations, including FEI--are well-positioned to assist companies in the recruitment of women board candidates who meet their specific needs.

Table 1 Board Seats Held by Women

                All Companies                  Fortune
Study           In the Study    Fortune 500    501-1000

Atlanta          7.1% (175)*    12.7% (14)     9.1% (12)
Boston           9.0% (100)     12.4% (11)     9.8% (11)
Chicago         12.4% (50)      12.7% (34)     8.4% (11)
Philadelphia    11.5% (120)     16.8% (26)     9.2% (17)
United States   13.6% (500)     13.6% (500)    NA

* The number of companies is shown in parentheses.

Table 2 Companies Without Women Directors

                All
                Companies                    Fortune
Study           In the Study   Fortune 500   501-1000

Atlanta         54.3%           7.1%         33.3%
Boston          50%            10%           27.3%
Chicago         10%             6.5%         27.3%
Philadelphia    34.2%           0.0%         41.2%
United States   10.8%          10.8%         NA

Table 3 Companies With at Least One Woman Director, by Industry Sector*

Study         Highest                  Lowest

Atlanta       Utilities         100%   Healthcare             0%
              Insurance         100%   Biotechnology         27%
              Retail             75%   Technology            29%
Boston        Medical Devices    71%   Services              41%
              Finan'l Services   58%   Manufact./Industrial  42%
              Biotechnology      56%   Technology            48%
Philadelphia  Healthcare/              Communications/IT     53%
              Pharmaceutical     85%   Retail/Services       57%
              Utilities          82%   Manufacturing/
              Financial/Ins      68%   Industrial            65%

(* The Chicago study does not include an industry breakdown.)

Data sources: Catalyst, 2003 Catalyst Census of Women Board Directors of the Fortune 500, New York, 2003. Board of Directors Network, The Time is Now! Women in the Boardrooms, 2003 Georgin Public Companies Study, Douglasville, Georgia, 2003; The Boston Club, Strategic Assets: The 2003 Census of Women Directors and Executive Officers, Boston, 2003; The Chicago Network, 5th Annual Census of Chicago's 50 Largest Companies, Chicago, 2003. The Forum of Executive Women, Women on Boards: Different Perspectives. More Talent. Better Results. Executive Suites Initiative. Fort Washington, PA, 2003.

Patricia M. Flynn ([e-mail]) is Trustee Professor of Economics and Management and former dean of the McCallum Graduate School of Business at Bentley College. She is a director of Boston Fed Bancorp and Boston Federal Savings Bank. Susan M. Adams (sadams@bent ley.edu) is Associate Professor of Management and Director of Field-Based Learning at Bentley. The authors conducted the research for The Boston Club's 2003 Census of Directors and Executive Officers.