Report shows ‘broken rung’ leaves women behind

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A deep dive into the top 77 public companies headquartered in Michigan show many gains for women on boards of directors and in the C-suites in the past two years, but the report says a “relentless focus” is needed to fix gaps in the pipeline that contribute to lifetime inequities.

Inforum published its 2020 Michigan Women’s Leadership Report on Jan. 26. It tracks the progress of gender diversity at the highest levels of management and governance for the state’s leading firms.

“Women have been joining the workforce in greater numbers since the 1960s but are disproportionately represented in leadership positions across the country. Through the Michigan Women’s Leadership Report, we take a critical look at what progress can still be made with the public companies who are located here in our community,” said Terry Barclay, CEO of Inforum.

“In 2017, there were four women CEOs among Michigan-based public companies, and nearly half had no women executive officers. The 2020 report … will enable all companies to see where we stand today and how we can use that information to make meaningful changes for more equitable workplaces in the years ahead.”

The research — conducted for Inforum by Sheri Perelli and Toni Somers at the Institute for Leadership and Diversity at Wayne State University’s Mike Ilitch School of Business — shows results are improving slowly over time, but women still make up a small minority of the top leadership ranks in Michigan with 6% holding the role of CEO and 21% sitting on boards of directors.

For women of color, the gap is even wider. Black, Hispanic/Latina, Asian and indigenous women on the whole hold only 2% of board seats, 2% of named executive officer (NEO) or C-suite roles; and 2% of executive officer positions.

Methodology

To determine the top public companies in Michigan, the researchers took into consideration the standards used by the Fortune 500/1000 rankings, the Russell 1000/3000 indices and the S&P 500 to create revenue and market capitalization thresholds to produce three tiers of companies based on size.

Smaller, only technically publicly traded companies with small boards of directors comprised of owners or executive officers were eliminated this year, lowering the number of companies studied to 77 from the 100 measured in past years.

Fiscal 2018 revenue and market capitalization as of May 10, 2019, were used to create the tiers.

Tier one companies are defined as those with a minimum market cap of $2.5 billion or $5 billion in revenue (27 companies), tier two are those with a market cap of $150 million or revenue of $100 million (28 companies), and tier three companies are those that are too small to meet tier two criteria (22 companies).

Key findings

According to the report, on the national level, women’s representation on boards and as NEOs hit new highs among Fortune 500 and S&P 500 companies in 2019, and the Thirty Percent Coalition launched a nationwide campaign to get more women of color on boards.

For the first time, 20% of the directors of Russell 3000 boards are women, a figure Michigan exceeds at 21%.

Among the largest companies, all-male boards are “a shrinking species.” Additionally, the percent of women directors in a sample of large Michigan public companies has grown from 16% in 2007 to 29% today.

Of 121 new Michigan directors elected between 2017 and 2019, 26% were women, compared to 30% in S&P 3000 companies.

Still, 18% of Michigan’s 77 public companies have no women directors, compared to 10% at S&P 3000 firms.

Progress in the C-suite is slower still. Women lead only five publicly traded companies in Michigan, or 6%. 

Women comprise only 12% of NEOs, a number that has remained static since 2007, and only 19% of executive officers.

About 58% of Michigan public companies have no women NEOs. This is the pool from which most CEOs are chosen, so a dearth of representation in the former area creates further inequity in the latter.

Women are scarce or absent at 38% of Michigan companies in all three roles — executive officers, NEOs and directors, according to the report. Six companies have no women in any of those roles and at another 23, women are represented in just one.

As previously mentioned, women of color remain underrepresented across all categories, at just 2% in all categories.

Problems in the pipeline

In her introduction to the Michigan Women’s Leadership Report, Barclay cites a term used in the 2019 McKinsey/Lean In Women in the Workplace study — the “broken rung.” The term describes a “career ladder that disadvantages women starting with the first opportunity for promotion.”

Although men and women are hired into entry-level positions at about the same rate, the study found only 72 women are hired or promoted to management level for every 100 men given that opportunity.

Since that first promotion sets employees up for later advancement, the gap in the pipeline continues widening throughout women’s careers until there are C-suites and boards across the country with little to no female representation.

Barclay and the Women’s Leadership Report authors concur with the remedies offered in the McKinsey report, including setting goals for representation in first-level management, requiring diverse slates of candidates for hiring and promotion, establishing clear evaluation criteria to prevent bias in promotions, requiring evaluators to take unconscious bias training, and making sure women receive opportunities to be trained for the skills they’ll need to take the next career step.

Although Inforum is not a lobbying body and does not advocate for any specific policy or legislative action, the Women’s Leadership Report tallied several private company, state or national actions put in place to address the gender parity problem.

First, asset manager BlackRock issued guidelines in 2018 that said its portfolio companies should have diverse boards, including at least two women.

Secondly, California passed a law in 2018 that would require public companies based there to have at least two women on boards of five directors and at least three on boards with six or more directors by 2021. Although the law is being challenged in court, other states have taken up the baton and are considering similar legislation.

On the federal level, steps have been taken to require transparency, the first step in all meaningful change. In November 2019, the U.S. House of Representatives approved H.R. 5084, which would require public companies to disclose diversity information about their boards of directors, board nominees and executive officers. The bill is still in a Senate committee at last check.

Barclay also referenced the announcement Goldman Sachs made at the 2020 World Economic Forum annual meeting in Davos, Switzerland, on Jan. 23, namely, the company will not work on stock market listings, aka initial public offerings (IPOs), of companies that don’t have “at least one diverse board member.”

Equilar, a data provider for corporate boards, projects gender parity will be achieved on corporate boards across the Russell 3000 by 2034 — a distant date but still closer than the 2055 projection it issued based on 2016 data.

Making progress

Several tier one and tier two companies in West Michigan have risen above the pack when it comes to making aggressive strides on board gender parity.

“There are companies who are showing it can be done,” Barclay said.

In tier one, Stryker, Kellogg and Herman Miller have increased the percentage of women on their boards to 40%, 42% and 40%, respectively, up from 25%, 17% and 17%, respectively, in 2007.

In tier two, CMS Energy increased its female board member representation from 11% in 2007 to 42% in 2019, and Steelcase improved from 27% to 40%.

Barclay said when investors and shareholders are engaged and invested in the topic of diversity, companies tend to make quicker progress.

“What the institutional investors are thinking about this topic is hugely influential because they make the decision about investing in the stocks of companies and often are bellwethers for what issues have economic importance,” she said.

“What we think is important is to understand that this is an economic issue. It’s a business issue. It’s about performance, that diversity of thought is important to success. What we are increasingly hearing from CEOs is that that is what their focus is. When you start to get gender and racial diversity on a board, the circle of who you know on the board grows, and you are able to capitalize on diverse thinking as you make key decisions for the company. It just propels success.”

Inforum is hosting a presentation of the report from 7:30-9:30 a.m. Feb. 4 at Watermark Country Club, 5500 Cascade Road SE in Cascade Township.

It will include a panel discussion featuring Camila Noordeloos, principal, Grand Ventures; Christina Keller, president and CEO, Cascade Engineering; Mary Tuuk, president and CEO, Grand Rapids Symphony; and Sandra Gaddy, CEO, Women’s Resource Center.

Tickets, $35 for Inforum members and $45 for nonmembers, are available at bit.ly/InforumMWLreportpresentation.

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