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On 18–19 September, CFA Institute will host Alpha and Gender Diversity 2017 in Toronto, the latest in its series of Women in Investment Management events. Attendees will have opportunities to discuss gender diversity, foster professional development, and meet their peers from other regions in North America.
The business case for gender diversity on corporate boards and executive teams is both well established and compelling. Research shows that public companies that have female representation on their boards of directors substantially outperform those that don’t.
Firms with at least one female board member earned an annual excess compound return of 3.5% vs. the MSCI ACWI since 2005, according to the Credit Suisse report “CS Gender 3000: The Reward for Change.” Companies with at least 15% women in senior management have a return on equity (ROE) 18% higher than those with less than 10% women.
The message that female representation in corporate leadership constitutes a competitive advantage is getting through. “Among MSCI Wold index companies,” Matt Orsagh, CFA, CIPM, reports, “women held 18.1% of all directorships as of August 2015, up from 15.9% in 2014.”
Brenda Trenowden, CFA, and Diane Nordin, CFA, are doing their part to move that needle. Trenowden is head of the Financial Institutions Group at ANZ Bank and chair of the 30% Club. A former partner at Wellington Management, Nordin is on the boards of Fannie Mae, Antares Capital, and CFA Institute.
At the Alpha and Gender Diversity: The Competitive Edge conference, the duo shared their unique perspectives and firsthand experience of current trends in corporate board composition and governance, and offered advice on how women in investment management can chart their paths to board appointments.
Global Trends in Board Composition
Trenowden focused on how corporate boards are evolving across the globe, how their gender composition has shifted over the last five years, and the role the 30% Club has played in driving those changes.
In partnership with corporate boards and executives, the 30% Club strives to achieve 30% female representation on the boards of FTSE 100 companies. Why 30%? “Because that is the point where women as a group start to have more influence and a greater voice,” Trenowden said.
In the United Kingdom, the 30% Club is close to realizing that goal. As of 2015, 26.1% of FTSE 100 board positions were filled by women. Government support, particularly the Davies Commission, has been critical to the accelerating progress the group has helped propel, Trenowden noted. “There was a consensus among political leaders that the status quo was unacceptable,” she said. The organization has since embraced an international outlook.
Trenowden highlighted how soft legislation, such as term limits for board members, and corporate governance rules have helped increase the percentage of women on boards in the United Kingdom and Europe. “Soft legislation has worked better than hard legislation, such as hard quotas,” she said, citing research from the University of Cambridge.
Strong media support in the United Kingdom has been critical as well. “It makes a difference,” she said. “We have frequent requests for interviews and many articles in the press about it.”
Unfortunately, Trenowden doesn’t see this same kind of “coming together” in the United States, where the percentage of women on boards has continually lagged behind the United Kingdom and Europe. She feels soft legislation, particularly terms limits for board members, could be a big part of the solution. “Only 13 of the S&P 500 companies have term limits, down from 24 in 2010,” she said. “If you don’t have board turnover, it’s hard to move the needle.”
The 30% Club is now broadening its focus to increasing the number of women in the executive suite pipeline. Most companies do not have the data to determine why they don’t have more women in the C-suite, so Trenowden encourages companies to look at the various levels of management and track how long women stay at each level before moving up. Many companies find that women do very well on their annual employee performance evaluations but are not promoted as fast as men.
An Unexpected Route to the Boardroom
For her part, Nordin had no plans to pursue a board appointment when she retired from Wellington’s fixed-income division. But the offers soon started coming in.
“A recruiter who specialized in placing women on boards found me for Fannie Mae,” she explained. “Wellington had established the first Ginnie Mae mutual fund years ago, and the firm was also involved in helping to stabilize the mortgages market after the financial crisis. Fannie Mae was a great fit for my skill set.”
It was a great fit in other ways. Nordin’s colleagues appreciated the value of having a broad spectrum of perspectives. “The board chair at Fannie Mae clearly saw the benefits of having a diverse board and was committed to making it happen,” she said. With that kind of support, Nordin knew she could have influence.
Her service on the Fannie Mae board opened up other opportunities. After joining, Nordin was “on the radar” of other board searches. She was recruited for the board of Antares Capital, a private equity firm owned by the Canada Pension Plan Investment Board (CPPIB). This, combined with her work for Fannie Mae, gave her a diverse yet complementary set of responsibilities.
Preparing Your Own Path to the Boardroom
So what advice do Nordin and Trenowden have for investment professionals looking to make their way to a corporate board appointment? They outlined a number of critical steps.
- Seek out executive recruiters with a track record. Nordin said that, in retrospect, she should have been more intentional in finding recruiters, especially those who focus on diversity — not just those who want to have a woman on “the list” of potential candidates.
- Bring your authenticity to the process. Women naturally possess different skills than men, among them soft skills like perceptiveness, sensitivity, and intuition, that add to the diversity of thinking in the boardroom. “Board chairs are looking for diversity of wisdom,” Nordin said. One CEO told Trenowden that if he had a problem that involved people, he always went to the women on his board to get to the crux of the issue. Both Nordin and Trenowden observed that the performance of all board members improves when there are more women. They all tend to be more open and conscientious as a result.
- Examine why you want to join a board. A board should be made up of people who are smarter as a group than as individuals. “It’s not about power,” Nordin explained. “It’s about the contributions you can make to the visionary thinking and strategy for a company.”
- Network and gain experience. Build connections throughout your investment career and use your natural networks even if you cannot join a corporate board until after you retire. The jury is still out on whether nonprofit board experience helps qualify you for the corporate sector, but it can be useful preparation. By joining Fannie Mae’s board, Nordin attracted the attention of other firms.
- Be the interviewer as well as the interviewee. Nordin noted that she came from an environment at Wellington where she could speak her mind. “Male colleagues actually heard me and didn’t just pretend to listen,” she said. So understand the culture and dynamics of the board to determine if you are a good fit and can influence its direction.
- Know the company and the industry. This may seem obvious, but having an interest in the firm and its strategy is key. Trenowden said that buy-side or sell-side analysts are ideal candidates because of their analytical and investment expertise. “As an investor you bring an intimate knowledge of companies and their competition,” she said.
By following these steps, Nordin and Trenowden believe, women can increase their presence on boards and in the C-suite and — by adding their perspectives to the mix — help improve the performance of the companies they serve.
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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.
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