Business
5:03 pm
Thu May 2, 2013

State Treasurer Calls for More Diversity on Corporate Boards

A recent report from global research firm GMI Ratings found the percentage of female directors in S&P 500 companies rose only one-half of a percentage point since December 2011.

Smaller companies have even lower representation on boards by women, despite reports that a diverse board is good for business.

“We have very strong data showing a correlation to having women on boards improving investment performance,” said Pennsylvania Treasurer Rob McCord. “For large-cap companies it appears to improve investment performance by more than 25 percent.”

So why do women continue to be left out of the corporate board scene? McCord said there are several factors, including people unwilling to let go of the power and perks that come with some big board memberships. McCord’s solution is to implement limited term limits on boards.

“Too often business leaders just pound their chest and say, ‘We need to run government more like a business!’" McCord said. "But we need to recognize that sometimes business gets a little prone to crony-capitalism and that the prudent application of term limits, which a lot of business leaders love to see in the public sector, would be a good thing to have in the private sector."

McCord said term-limiting one-third of seats on boards could go a long way in improving performance.

“Having diversity of opinion, so not just women on boards, but minorities on boards, can make a big and positive difference,” he said, “and you want to have more than just one token diversity board member. Three is sort of the critical mass.”

Placing term limits on at least a portion of any board, McCord said, would create more opportunities for women and minorities to fill the vacancies.

McCord is a member of the Thirty Percent Coalition, a group of public and private sector leaders whole goal is to attain at least 30 percent female representation on public company boards by the end of 2015.

Related Program