Why do men still dominate corporate boards?
Lina Holmqvist & Johanna Berg, students from the university of Gothenburg.
There is a lot of research that discusses how the composition of the election committee affects boards, but very few touch upon their active work in composing boards and thus being able to control gender distribution. The election committee has the opportunity to decide who qualifies for boards and who does not. They have a key role in inviting more female candidates to the boardroom. Lina Holmqvist & Johanna Berg, students from the university of Gothenburg, have done a study on the subject and shared their key findings and solutions with us. Enjoy the reading and let us know what you think!
Women have been underrepresented in corporate management and boards for decades, leading to unequal power distribution and discriminatory recruitment. Allbright (2022) reports that boards mainly consist of people with the same background, education, ethnicity, age, and gender. Recent reports even suggest that the average age among the board members is increasing, with commentators claiming that the results show an “increased number of old men”(PWC Sweden, 2023). The lack of female directors has become an essential corporate governance issue, associated with ethical and financial performance. Even though women have made progress in achieving economic and political power, they have not encountered the same opportunities on corporate boards (Atinc et al., 2021). Advocates for Swedish business life claim that there are competent and qualified women available, and therefore competence should be the decisive criterion. However, reports claim that women are still not chosen (e.g. PWC, 2023; Allbright, 2022), and therefore, we think that the decisive criteria should be questioned. What makes certain candidates more interesting when it comes to experience, education, and skills?
We are two master's students from the University of Gothenburg at the school of business economics and law who have done a study in which we investigate why female underrepresentation is still a problem and why a male-dominated structure still exists. We interviewed 16 members of various election committees who represented publicly listed companies on the Swedish stock exchange. In addition, to get an outside perspective, we included a specialized recruitment consultant. The foundation of the research was made together with the Swedish corporation Diverse Executive Boards (DEB), an educational initiative aimed to open the door for women to enter corporate boardrooms (DEB, 2022). DEB participated on the subject of female underrepresentation and provided information and knowledge that enabled building the background of the research. The election committee was of interest to focus on since they are responsible for the re-election and recruitment of the board of directors, and possess a key role in the professionalization and development of the gender distribution on the board. Most research has previously focused on corporations in general, and how their boards are composed, but less emphasis has been placed on those selecting the decision-makers. In our study, we highlight the role of the election committee and their possibility to impact gender equality in corporate boards.
After analyzing and coding the data that was given from the interviews, we found that recruitment to corporate boards is mainly done through two processes: informal and formal approach, and sometimes a mix of both depending on the complexity of the recruitment. The informal approach is referring to recruitment through social networks, and the formal approach is through external recruitment consultancy firms. Due to convenience reasons, the informal approach is practiced to a greater extent. It is shown that recruitment through social networks can be problematic and generate skewed gender distribution. This can be linked to the fact that men have historically dominated the industry, whereas women are newcomers, who have yet to achieve the same experience or gain the same social network. This entails that their opportunities are more limited and that they are kept behind closed doors. Moreover, we identify underlying psychological factors that interfere with the recruitment process, such as social structures, stereotypes, gender expectations, and homosocial reproduction (Arfken et al, 2004; Allemand et al., 2022; Sidhu et al., 2020). The latter refers to the tendency to choose someone with similar characteristics as oneself (Holgersson, 2006).
Another finding is that there is an awareness of the skewed gender distribution, but that no election committee deliberately wants to contribute to its retention. We distinguished two camps where the first camp intentionally pushes for change by searching for candidates in a wider spectrum, uses different tools to find female candidates, and has modified the requirement profile. For instance, corporations in this camp appoint inexperienced, younger, international, and female candidates that are not just well-known names. Boards were previously metaphorically described as an elephant cemetery, but there are corporations pushing for a shift. Inexperienced candidates are today considered to a wider extent, but board experience is still the most important factor. The other camp believes that gender inequality is a generational issue that will solve itself with time. This mindset can be seen as preserving the established structure and tradition, leaving the initiatives for change to others. Further identified is that external and internal pressures significantly impact the work of the election committee and their reasoning. It could be pressure from employees, investors, media, legislation, and stockholders demanding more of the election committee and how they reason in their recruitments. If no pressure is applied, the risk of preserving old structures, habits, and traditions remains. In other words, female candidates will still be kept from entering the boardroom as the election committees select safe cards within their networks.
So what are the potential solutions to female under-representation in corporate boards? Many believe that quotas might solve gender inequality. Dobson et al. (2017) and He and Kaplan (2012) explain that quotas can increase the number of women on boards, but that it might do more harm than good. They mention how quotas can hurt women's ability to be perceived as qualified and therefore not receive the same respect. The effect of quotas could also lead to Kanter’s concept of “token females”, meaning that women are only being appointed due to representational matters (Kanter, 1977). It can also result in what happened in Norway, where the same women could be distinguished in not only a few boards but in several, preventing new names from entering. However, based on the results of our study, several of the interviewees believed that the threat of quotas can push those who do not meet an even distribution in the right direction.
To open the door for more female candidates to enter, change must be initiated.
In our study, we came to the conclusion that change must take place on many levels. Some believe that the root cause is due to societal inequalities such as unequal pay and uneven parental leave. Beyond this, other social structures inhibit women from advancing in their careers. This confirms a need to modify regulations, not just in corporate boards but further down to a deeper societal level. In Sweden today, we have well-established guidelines and regulations, not to mention the Swedish Code of Corporate Governance (“The Code”). However, The Code is only a governing regulation, with room for individual interpretation on how to proceed, which leads to gender equality being prioritized differently. However, the importance of the election committee and its influencing power should not be overlooked. They possess a key role to influence gender distribution in corporate boards since they are the ones in charge of the recruiting process. If they step out of their comfort zones and stop recruiting well-known names with years of board experience, they can leave room for other qualified candidates including women. Finally, responsibility should be placed on already successful corporations that others tend to look up to. If these dare to change a pattern regarding equality in boards, others will follow. As Albert Einstein once said: “It takes a touch of genius, and a lot of courage, to move in the opposite direction.
Summary of potential solutions:
Implementing quotas or at least the threat of it
Modify regulations regarding unequal pay and uneven parental leave
Put pressure on the election committee to step out of their comfort zones
Make sure successful corporations take responsibility in terms of inequality
To read more about this topic, we welcome you to read our study linked in the reference list below.
// Lina Holmqvist & Johanna Berg
References:
Allbright. (2022). Noll nya chefs kvinnor. Allbright-rapporten november 2022. https://www.allbright.se/allbrightrapporten-2022#allbrightrapporten-2022-3
Allemand, I., Bédard, J., Brullebaut, B., & Deschênes, J. (2022). Role of old boys’ networks and regulatory approaches in selection processes for female directors. British Journal of Management, 33(2), 784-805.
Arfken, D. E., Bellar, S. L., & Helms, M. M. (2004). The ultimate glass ceiling revisited: The presence of women on corporate boards. Journal of Business Ethics, 50, 177-186.
Atinc, G., Srivastava, S., & Taneja, S. (2021). The impact of gender quotas on corporate boards: a cross-country comparative study. Journal of Management and Governance, 26. p. 685-706.
Berg, J., & Holmqvist, L. (2023). The recruitment process to corporate boards-A qualitative study investigating female underrepresentation.
Diverse Executive Boards. (2022) About DEB. https://diverseexecutiveboards.com/about Holgersson, C. (2006). Homosociality as a gendered process. Norma, 1(1), 24-41. Kanter, R. M. (1977). Men and women of the corporation. New York: Basic Books.
PWC. (2023). Compensation and working methods of Swedish boards. Fewer female chairmen on the boards of large companies. PWC Sweden. Published 2023-02-27. https://www.pwc.se/sv/styrelse/styrelsearvoden.html
Sidhu, J., Feng, Y., Volberda, H-W., & Van Den Bosch, F. (2020). In the Shadow of Social Stereotypes: Gender diversity on corporate boards, board chair’s gender and strategic change. Organization Studies. Vol 42. No 11.
