No Seat at the Table: How Corporate Governance and Law Keep Women Out of the Boardroom.

• Author: Broome, Lissa Lamkin
• Position: Book review

1. INTRODUCTION II. THE NUMBERS A. Percentage of Women Directors and Multiple Board Seats Held by the Same Woman B. Trophy Director Analysis C. The Wall of Shame D. The Path to a Board Seat and Changes in the Composition of Female Board Members III. THE BENEFITS OF INCREASED NUMBERS OF FEMALE DIRECTORS IV. THE EXPLANATION FOR THE LACK OF GENDER DIVERSITY ON CORPORATE BOARDS. V. PRESCRIPTIONS FOR IMPROVEMENT VI. OTHER GROUNDS FOR DIVERSITY VII. CONCLUSION I. INTRODUCTION

   In No Seat at the Table: How Corporate Governance and Law Keep Women Out of the Boardroom, Douglas M. Branson, (1) the W. Edward Sell Chair in Business Law at the University of Pittsburgh School of Law, documents the dearth of women board directors at Fortune 500 companies through an analysis of data from the 2001 and 2005 proxy statements of these companies. (2) Branson's book is an important addition to a growing body of legal (3) and other literature4 on the lack of diversity in corporate boardrooms. Branson contends that greater gender diversity would improve corporate decision making by helping to ensure a variety of perspectives at the boardroom table, reducing negative stereotypes, and encouraging women and minority employees. (5)

   Part II of this Review details Professor Branson's numerical analysis of women board directors of Fortune 500 companies and provides some further numerical insights. Part III reviews the benefits Branson ascribes to increased board diversity, which are unfortunately not as well-articulated as diversity advocates might hope. Part IV explores Branson's explanations for the lack of greater gender diversity on corporate boards. Part V examines Branson's general prescriptions for improvement, supplemented by my own more specific suggestions for enhancing board diversity. Finally, Part VI proposes that lack of racial and ethnic diversity on corporate boards is as significant an issue as the lack of gender diversity discussed in Branson's book.

2. THE NUMBERS

   The two years of proxy data selected by Branson for examination--2001 and 2005--provide a pre-Sarbanes-Oxley Act and a post-Sarbanes-Oxley view of corporate board diversity. (6) Sarbanes-Oxley and the stock exchange listing requirements increased the emphasis on corporate governance and the independence of directors on audit and nominating committees. (7) Board member nomination has shifted from the almost exclusive province of the CEO prior to Sarbanes-Oxley, to the domain of the board's nominating committee after Sarbanes-Oxley. (8) Thus, Branson's selection of these time periods provides insight into whether and how this change in procedure has affected board gender composition, although it is possible that the effects of Sarbanes-Oxley and the revisions to the stock exchange listing requirements may not have been fully manifested by 2005.

   1. Percentage of Women Directors and Multiple Board Seats Held by the Same Woman

      Although the percentage of Fortune 500 board seats and the absolute number of women serving on boards of Fortune 500 companies increased slightly between 2001 and 2005, the numbers and percentages are still low compared to the percentage of women in the population. Catalyst, a research and advisory group devoted to advancing women in the workplace, conducts a regular census of the gender composition of Fortune 500 boards. Catalyst reported that 12.4% of Fortune 500 board seats were held by women in 2001 (9) and 14.7% in 2005. (10) As Branson notes, even these percentages may be misleading, as the increasing percentage of women directors was skewed somewhat by the overall decline in board size, (11) and by the fact that the absolute number of individual women serving on corporate boards is less than indicated since some women serve on multiple boards. Because of multiple board memberships, Branson proclaims that the actual number of women on Fortune 500 boards is comparable "to the size of a senior class at a middle-size high school." (12) In 2001, for instance, although women held 678 board seats, these seats were occupied by only 480 different women. (13) By 2005, 568 different women were represented on Fortune 500 boards. (14) Branson criticizes Catalyst for reporting the percentage of board seats held by women rather than the percentage of all directors who are female. (15) Catalyst's census data, however, for every year until 2006, include a detailed breakdown of the number of individual women holding Fortune 500 board seats. (16) According to Branson's calculations, when the number of individual women is factored in (instead of the number of board seats held by women) the percentage of Fortune 500 board seats held by women in 2001 declines further to 8.3% in 2001 and 11% in 2005. (17) This critique may be misguided, at least in the absence of any evidence that multiple board seats are more common among women than men. There is no indication that Branson counted the number of individual men who served on Fortune 500 boards, rather than just the number of board seats held by men. Undoubtedly, some men serve on more than one Fortune 500 board.

      Branson chastises Catalyst, noting that even with evidence of little progress in board diversity, "Catalyst has only praise for corporations and their efforts, perhaps because corporations fund many of the organization's programs." (18) Branson notes that the funding is sufficient to support offices for the organization in New York, Toronto, and San Jose. (19) Diane Brady has reported that the specificity of the data supplied from Catalyst as a result of its board diversity surveys declined for the 2006 report, suggesting that the organization has become concerned about embarrassing its corporate supporters. (20) Indeed, the Catalyst website has multiple-page reports online for each year Catalyst conducted a director diversity survey, (21) which are sponsored by various corporations. (22) Catalyst posted only seven pages for its 2006 and 2007 surveys, (23) although one of the pages lists the Fortune 500 companies with no women directors, providing some public shaming for those corporations with absolutely no board gender diversity. (24)

   2. Trophy Director Analysis

      According to the Catalyst data, in 1999, almost 76% (371 total) of the women serving on Fortune 500 boards served on only one Fortune 500 board, but 3.5% (17 total) served on four or more boards, with an additional 6.5% (32 total) serving on three boards. (25) Thus, 10% (49 total) of women board directors served on three or more Fortune 500 boards. Branson and others have labeled such directors "trophy" directors. (26) By 2005, the Catalyst data show that the percentage of individual women serving on three or more boards declined to 7.6%. (27) By Branson's count, however, the number of trophy directors increased between 2001 and 2005 from 30 to 79. (28) The discrepancy may be because Branson appears to count all boards on which individual women serve, while the Catalyst numbers include only other Fortune 500 boards. (29) The term "trophy" director is sometimes used to label a director selected because of his or her high visibility and whose contribution to the board is generally limited to lending his or her name to the board list, rather than a serious dedication of the individual's time and expertise. Branson describes these directors as having "celebrity status." (30) In this category, he places Susan Bayh, whose celebrity status derives from her husband, a U.S. Senator from Indiana, Evan ("Birch") Bayh. Mrs. Bayh sat on eight boards in 2005. (31) She also falls into a new category identified by Branson--"academic trophy director"--since she lists her occupation as Former Distinguished Visiting Professor, Butler University. (32) By Branson's count, the "academic trophy director" category was populated in 2005 by 17 women with ties to colleges or universities who held collectively 97 board seats. (33)

      The "trophy director" category, however, might be better segmented into the following subcategories: "celebrity director" (someone who is lending her name rather than substantial time or expertise to a board; this person may be on one or multiple boards); the "retired director" (someone who has retired from a significant position and is remaining active and engaged by serving on one or more boards, but who reserves sufficient time free of board commitments to be considered retired); and the "professional director" (someone who is retired from a day-to-day position, self-employed, or employed in a context that provides a great deal of flexibility and free time, and who spends a majority of her working week on board-related activities). It is important to distinguish between the categories. There may be a negative connotation to the trophy director, but the retired and professional directors may add valuable insights to board deliberations based on their former employment experience as well as their knowledge and expertise from service on other public company boards.

   3. The Wall of Shame

      Another point for examination is the number of boards with no women or only one woman board member. Catalyst reports approximately 13% of Fortune 500 boards (66 companies) had no female members in 2001, (34) while less than 10% (48 companies) had three or more women board members. (35) In 2005, the percentage of companies with no female board members declined to just over 10% (53 companies), and there was a substantial improvement in the percentage of companies with three or more women board members to over 15% of Fortune 500 boards (76 companies). (36) Branson's figures for 2005 reveal what he labels a "startling fact: a clear majority, 51.2%, of U.S. major corporations have no women directors or engage only in apparent tokenism, with one director who is female." (37) Among the companies with no female board members in 2005 were Apple Computer, (38) Dillard's department store, (39) and Levi Strauss. (40)

   4. The Path to a Board Seat and Changes in the...