Merriam-Webster Collegiate Dictionary first printed the term glass ceiling in 1993. Since then, we’ve added more terms to our gender equity vernacular, including glass cliff, golden skirt, and now glass rug. (See here for a detailed explanation of glass cliff and golden skirt.)
We need the new term glass rug because even after women break through layers of glass ceilings to reach unprecedented heights, unconscious bias still follows them. Specifically, when women break the glass ceiling, they are often pushed off the glass cliff as boards pull the glass rug out from under them.
The glass rug finally puts a name to the unwarranted gender bias female CEOs continue to experience after breaking the glass ceiling, and companies are feeling the effects of the glass rug in unrealized financial performance.
The glass rug is not good news. What is good news, however, is this: we don’t have to live with sub-optimal economic conditions and unconscious bias. We can implement solutions to address the glass rug (scroll down), and open avenues of economic opportunity for all.
Dirt Underneath the (Glass) Rug
Whether we’ve outdated the term or not, the glass ceiling is still a reality. Women make up 51 percent of the US population, represent 47 percent of the labor base, and are 57 percent of all college graduates with a bachelors’ degree and above. Yet women make up only 6.6 percent of CEOs in the 2019 Fortune 500—and that’s a record high. In 2018, women represented a meager 4.8 percent of Fortune 500 CEOs.
For the women who have broken the glass ceiling and achieved such leadership positions, they now must contend with another reality: the glass cliff, or the phenomenon where organizations change the gender of their leader during times of crisis. In many cases, it means women only get tapped to lead when an organization is on the brink of disaster.
If not the glass cliff, then it’s the glass rug female leaders must face once breaking the glass ceiling. As Jeff Green explains, “Even in a stable environment, mostly male boards are often quicker to remove a female leader at the first sign of turbulence.”
A closer look at the Fortune 500 companies shows that only six of them have majority-female boards: GM, Bed, Bath & Beyond, Casey’s General Stores, Viacom, CBS, and Omnicom Group. Two of the companies with majority-female boards also have female CEOs: GM and Bed, Bath and Beyond. So of the current 33 female CEOs in the Fortune 500, 31 of them have a majority male board. Moreover, 12 Fortune 500 companies have zero women on their boards, and all 12 of these companies have a male leading the C-Suite.
While women have been making progress in the number of board seats they hold, from 16 percent in 2016 to 22.5 percent in 2018, men still represent 77.5 percent of the boardroom. Beyond issues of fairness, this lack of boardroom diversity jeopardizes an organization’s performance—and in more ways than one.
Diversity on Boards Matters. Here’s the Data to Prove It.
The jury is in: gender equity on boards strengthens a company’s competitive edge and boosts its financial performance. The Harvard Business Review found companies with women directors manage risk more effectively and better focus company strategy on long-term priorities.
Additionally, women directors give companies an edge in our already tight labor market. At a time when 65 percent of all jobs will require postsecondary education and women make up 57 percent of the college-educated population, companies cannot afford to ignore half of their talent pools. By increasing the representation of women in the boardroom and thus widening the talent pool at the top of a company, companies can simultaneously move toward fulfilling strategic diversity and inclusion efforts.
Gender equity on boards shifts company culture, signaling to rising women and minority talent the real, tangible importance a company places on diversity and inclusion. It signals to existing talent, new hires, and interns they have a path to advancement within the organization.
Considering how women, black, and Latino employees are more likely to quit their jobs than white men, and employees are less likely to quit the longer they’ve worked at a job, companies pegging D&I initiatives to new talent hires should pay attention.
That’s not all. In ranking 2009’s Fortune 500 companies by the number of women on their boards, the companies in the highest quartile realized a 42 percent higher return on sales and a 53 percent higher return on equity than those in the lower quartiles. And of the companies that became inactive on the Russell 3000 Index, more than 55 percent had one or zero women on their boards.
The data make it clear that gender equity on boards benefits companies, employees, and the greater economy. Still, something is keeping women from taking a seat at the table.
What’s Keeping Women from the Boardroom?
When I began my search for a board position, I was told I was too young. I’m 45. I was told I was too inexperienced. I have almost 25 years of experience and am the CEO of an AI company that quadrupled the sales pipeline in a single year. I was told I didn’t have the right knowledge. I have two master’s degrees: an MBA, and a combined computer science/cognitive science MA degree. My commitment was even questioned. I’m a former programmer fluent in four languages with expertise in data science; I’ve launched a successful enterprise SaaS tech startup.
So what’s keeping women from the boardroom? It’s hard to pin it down to a single factor.
For one, women face remarkable headwinds right from the start because most boards look for retired CEOs when considering new members, which means white men make up about 94 percent of those candidates.
“Check-box” diversity presents another limiting factor for gender equity in the boardroom. PwC’s 2018 Corporate Directors Survey found that, although more than 90 percent of directors say their boards are moving towards increased diversity, political correctness drives 52 percent of their efforts. Of the 714 directors they polled, 81 percent were male, 19 percent were female, and 48 percent think their shareholders are “too preoccupied with the topic.” Refusal to accept the importance of gender equity ultimately renders D&I efforts unsustainable as it leaves inclusion out of the endeavor.
Finally, data reveal the prevalence of unconscious bias that prevents women from ever reaching the boardroom. A Harvard Law survey of corporate directors reported that 53 percent of respondents believe in diversity—so long as diversity is limited to 40 percent of board seats or less. And for 10 percent of board directors polled in the survey, the optimal number of women on boards should be capped at no more than one in five women.
Glass Rug No Longer: Solutions for an Equitable Future
We can choose to let go of the status-quo, increase boardroom diversity, and create equitable conditions that expand the economic pie for all. Here are five steps we can take today to get us started in the right direction.
1. Expand the Size of Boards
Nearly half of S&P 500 boards added zero new directors in 2018. Since few boards enforce term limits and the typical required retirement age is 72 or higher, low board turnover seriously hinders efforts to increase board diversity. Expanding the number of seats at the table, at least temporarily, helps counterbalance low turnover and speed up gender diversity efforts. Boards can then return to previous sizes after adding diverse perspectives.
2. Implement a Mandatory 50-50 Slate
Requiring half of initial board candidates be female is another approach to create gender-balanced boards. In 2018, Heidrick & Struggles partnered with Stanford’s Rock Center for Corporate Governance to develop a major policy update on this front: they announced a new recruitment process requiring the first slate of board candidates to represent minority backgrounds.
3. Rethink Candidate Criteria
Boards would benefit from shifting their criteria requirements from titles held (such as C-Suite execs) to skills and experience. Female and minority directors now joining boards differ from their white male peers in that they are more likely to have stronger finance, technology, and consumer experience. Female and minority directors are also more likely to be serving on a board for the first time and less likely to have been CEOs.
Beyond skills and experience, boards looking to set their companies up for success in the Fourth Industrial Revolution should rethink age as a qualification factor, too. In NACD’s most recent survey of corporate directors, 47 percent believe AI is today’s biggest technology disruptor. As boards of the largest US companies get older, boards can increase their digital expertise by bringing on members who have spent the majority of their careers in the internet era.
4. Follow in California’s Footsteps
In 2018, California stood forward in becoming the first state in the US to mandate an end to all-male boards. New legislation requires publicly traded companies to place at least one woman on their board of directors by the end of 2019 or face a penalty. By 2022, companies with five directors must add two women to their boards; companies with six or more directors must add at least three women. Other states would be wise to follow suit and create similar laws to reap the economic benefits of boardroom diversity.
5. Sign the CEO Action for Diversity Pledge (And Act)
The CEO Action for Diversity Pledge is more than a pledge. It requires CEOs and boards of signatory companies to create an annual diversity and inclusion strategic plans. These plans must include measurement, programs in place, and accountability. The CEO and board must approve all plans and create oversight around the plans. We need more CEOs to join 650 of their peers and sign the pledge—then take action.
With the flailing views on the importance of gender diversity and the economic importance of women on boards, corporate directors must reexamine their views on gender diversity through the lens of their fiduciary responsibility. Doing so puts an end to the glass rug phenomenon— benefiting the company’s financial performance in the process.
© 2019 Pipeline Equity Inc.