Women-held board seats at Michigan public companies have hit record highs. By the start of 2020, women held 21 percent of board seats, compared with just 15 percent in 2017.
Michigan’s 77 public companies are keeping pace with the S&P 500. Michigan companies added 121 board members between 2017 and 2019 and 26 percent were women, compared to 30 percent women among the S&P 500, according to a new study to be released Monday by Wayne State University for Detroit-based Inforum.
However, that progress is mostly accounted for by heavy pressure from institutional investors demanding more gender equality on boards because research has revealed more gender parity equates to better financial performance.
When it comes to the C-suite, gender parity has further to go. Women comprise only 12 percent of named executive officers — the CEO, CFO and at least the next top three compensated management employees as required to be named in U.S. Securities and Exchange Commission filings — a figure that hasn’t budged in 13 years.
“We’ve seen board numbers (for women) improve as there has been tension placed on board members by institutional investors,” said Terry Barclay, president and CEO of Inforum. “The new frontier is the talent pipeline. It’s the broken rung. This all starts with the first promotion women don’t get, and we’re seeing the effects of that as it moves through the pipeline.”
For every 100 men hired or promoted to a managerial role, just 72 women are promoted or hired to manager, suggesting women are more likely to get stuck in entry-level roles, the 2019 McKinsey Women in the Workplace study said.
That creates a shrinking population of women in the pipeline moving up the career ladder. For instance, women hold 48 percent of entry-level jobs, but only 38 percent of manager positions, 34 percent of director jobs, 30 percent of vice president positions and so on.
Of Michigan’s public companies, 58 percent have no women named as executives, including large companies including Domino’s Pizza Inc., Ford Motor Co., Lear Corp., Penske Automotive Group Inc. and Taubman Centers Inc. In fact, Domino’s, Penske and Taubman have no women executives at all, named in SEC filings or not, according to the Inforum study.
There are outliers in the other direction: 40 percent or more of named executives are women at Ally Financial Co., CMS Energy Corp., Kelly Services Inc. and SpartanNash Co.
If companies promoted or hired women to managerial positions at the same rate as men, U.S. companies would add a million more women to management roles over the next five years, the McKinsey study said.
McKinsey recommends companies set a goal for representation of women among first-level managers, require diverse candidate pools at that level and put lower-level managers through unconscious bias training.
Barclay said that requires intentionality, making gender parity a top priority.
“Critical mass benefits more women and more companies,” Barclay said. “Intentionality starts at that first promotion. You need to make sure you’re looking at all of your immediate pre-management employees, not just the ones you feel most comfortable around or who look like you.”
Yet it’s unclear if companies will increase the share of women managers without more pressure.
In 2007 only 16 percent of board seats at Michigan companies were held by women. A decade later, in 2017, it was worse at 15 percent. Yet now that number has ballooned to 29 percent in 2020. Why?
BlackRock Inc., the world’s largest money manager with stakes in nearly every public company in Michigan, notified companies in which it invests that they should have at least two female directors.
Investors have become more activist in companies in recent years that don’t match public sentiment on social issues.
In 2016, Jonathan Litt, a Stamford, Conn.-based investor who is co-founder of Land & Buildings Investment Management LLC, sought to shake up Taubman Centers’ all-male board after years of poor stock performance. He blamed board Chairman and company President and CEO Robert Taubman and his brother, COO William Taubman, both sons of the late company founder A. Alfred Taubman; and the six other members of the board, who he said were too homogenous — all white men with an average age of 70 — with too much tenure.
That longevity promoted board relationships that are too close, therefore making the board members who weren’t members of the company’s namesake family reluctant to defy the brothers.
The board acquiesced only two months later by appointing Cia Buckley Marakovits, CIO, partner and managing director at New York City-based real estate investment firm Dune Real Estate Partners LP, to its board.
Litt hasn’t stopped and most recently threatened a third proxy battle with the Taubman family. Meanwhile, its board has exceeded gender parity with five out of nine of the mall operator’s board members now women.
The success of BlackRock and others triggered other investors to use their financial weight toward gender equality. The $210 billion New York State Common Retirement Fund, the third-largest pension fund in the U.S., vowed to oppose re-election of directors on hundreds of boards with no women. Pension funds in California and Massachusetts did the same.
California passed a law in 2018 requiring public companies operationally headquartered in the state to have two women on boards with five directors and three women on boards with six or more directors by 2022. That law, however, is being challenged in court.
In Italy, Germany and several other European countries, the number of women on board seats has tripled in recent years, according to a 2019 report by the Corporate Women Directors International, a research and advocacy group.
In 2006, Norway was the first country to implement a law requiring a minimum representation of 40 percent for women on company boards. Last year, women accounted for 35.5 percent of board seats on public companies on largest stocks traded on the Oslo Stock Exchange.
The mandates, however, have done little to increase the number of women in management, just like in the U.S.
Lansing-based CMS Energy Co. has increased to five women directors from just one in 2007. Women now represent 42 percent of the energy utility’s 12-person board.
Patti Poppe, president, CEO and board member at CMS, said the increase of board seats held by women is only intentional in the beginning.
“Going from zero to two is on purpose, but, really, when you are looking to add someone to the board, you don’t want a stranger … ,” Poppe said. “When you start to get gender and racial diversity on a board, the circle of who you now know grows.”
General Motors not only achieved parity on the board at General Motors Co., it exceeded it, as six of the automaker’s 11 board seats are held by women. Women represent 40 percent of board seats at Zeeland-based Herman Miller Co., Grand Rapids-based Steelcase Co., Kalamazoo-based Stryker Corp. and Monroe-based La-Z-Boy Inc.
La-Z-Boy had zero women on its board when Nido Qubein, president of High Point University in North Carolina, joined the board in 2005. But the board knew that needed to change, he said.
“… It was our immediate goal to find and attract skilled and experienced female directors who could enhance the company’s direction,” said Qubein, who is also the chairman of the board’s nominating and governance committee. “After all, the primary customer/decision maker in our stores is typically a female. We needed the input, engagement and strategic assistance from capable directors.”
Executive compensation research firm Equilar estimates the boards of the Russell Index 3000, the 3,000 largest U.S.-traded stocks, will achieve gender parity in 2034.
