Every Other One: More Women on Corporate Boards

An Update of a Policy Statement by the Committee for Economic Development’s Policy & Impact Committee

November 2014 Every Other One: More Women on Corporate Boards

Table of Contents

Women’s Economic Contribution Subcommittee Members 4

Summary 5

Introduction 7

The Business Case for More Women on Boards 7

The Supply/Demand Dynamics for Women Directors 10

International Progress 12

CED’s Path Forward 13

Endnotes 14

CED Trustees 15

2 The Committee for Economic Development (CED) is an independent research and policy organization comprised of over 200 business and academic leaders. Since 1942, CED has offered nonpartisan, reasoned solutions to the nation’s most critical issues.

Economic analyses of trade and competition focus on a country’s competitive advantage. America’s adaptability and diversity have been sources of strength in its economic development. Women have been integrated into the workforce in unprecedented numbers, and they should have the opportunity to succeed at the highest levels.

CED has been at the forefront of business-oriented public policy groups in advocating that U.S. corporations bring more women onto their boards. In 2011, CED formed a Women’s Economic Contribution Subcommittee, composed of 18 prominent men and women from the for-profit and nonprofit sectors, to study the issue and make recommendations. In 2012, CED issued a policy statement, “Fulfilling the Promise: How More Women on Corporate Boards Would Make America and American Companies More Competitive.” In “Every Other One: More Women on Corporate Boards,” CED provides updates on this topic and outlines its plan for direct outreach to the nominating committees of prominent corporate boards. Given the prominence of CED’s trustees and their service on many boards, CED can play a unique role in pursuing this objective.

We would like to thank the CED Trustees who served on the Subcommittee that prepared this report and the Policy and Impact Committee members who provided time and effort in its formation. We also wish to thank Michael Petro, Executive Vice President; Mindy Berry, Vice President of External Relations; Jeff Hooke, Vice President and Director of Economic Studies; Amy Morse, Associate Director of Programs; and Courtney Baird, Research Associate, for their support of this endeavor.

Beth A. Brooke-Marciniak Debra Perry Co-Chair Co-Chair Women’s Economic Contribution Subcommittee Women’s Economic Contribution Subcommittee

2000 L Street, N.W., Suite 700 • Washington, D.C. 20036 • 202-296-5860 • www.ced.org

Every Other One: More Women on Corporate Boards

Women’s Economic Contribution Subcommittee Members

Co-Chairs Janice Ellig Andrea Jung Co-Chief Executive Officer President and CEO Beth A. Brooke-Marciniak Chadick Ellig Grameen America, Inc. Global Vice Chair, Public Policy EY Gerri Elliott Linda E. McMahon Executive Vice President, Principal Debra Perry Chief Customer Officer McMahon Ventures Non-Executive Director Juniper Networks, Inc. Korn Ferry International, Inc. Deborah Hicks Midanek Melinda C. Ellsworth Chairman and CEO Members Vice President and Treasurer Solon Group, Inc. Kaiser Aluminum Corporation Lydia I. Beebe Susan Ness Corporate Secretary Barbara Flanagan Senior Fellow, Center for Chevron Corporation President Transatlantic Relations Caledonia Partners Johns Hopkins School of Nomi M. Bergman Advanced International Studies President Margaret Foran Bright House Networks Vice President, Justus J. O’Brien Chief Governance Officer Partner Shideh Sedgh Bina and Secretary Egon Zehnder Partner Prudential Financial Insigniam John F. Olson Barbara Hackman Franklin Partner Cynthia Cleveland President and CEO Gibson, Dunn & Crutcher LLP CEO and Founder Barbara Franklin Enterprises; Broadthink/BroadLit Former Secretary Patricia F. Russo US Department of Commerce Chief Executive Officer (Ret.) Robert H. Colson, Ph.D. Alcatel-Lucent Technologies, Inc. Patricia Gottesman Distinguished Lecturer of Advisory Board Chairman Accountancy Larraine Segil Ninah/Publicis Baruch-CUNY Chairman The Committee of 200 Patrick W. Gross Julie Hembrock Daum Foundation Chairman Partner and Head of the North The Lovell Group American Board Practice Paula Stern Spencer Stuart Ronald Grzywinski Chairwoman Chairman Emeritus The Stern Group, Inc. Michelle Finneran Dennedy ShoreBank Corporation Vice President & Chief Privacy Davia B. Temin Officer Kathy Hopinkah Hannan President and Chief Executive McAfee, Inc. National Managing Partner, Officer Global Lead Partner Temin and Company KPMG LLP Incorporated

4 Summary

Overview to prefer candidates that are either (i) sitting (or retired) CEOs, or (ii) current directors of public Women occupy 16.9 percent of Fortune 500 companies. Women are a small minority of those corporate board seats today, according to the two groupings today. In annual proxy statements, Catalyst 2013 Board Census. Progress has been nominating committees profess a desire for board made, but the rate of change has been slow. That diversity, but tend to repeat those customary percentage has grown just 3.3 percentage points behaviors, which ipso facto discourage diversity. (from 13.6 percent to 16.9 percent) in the last If this self-perpetuating cycle of exclusion could decade, despite women’s proportionately larger be broken, female c-suite executives, division presence in the labor force and higher education presidents, law firm partners, accounting enrollment. This disparity seems inconsistent with firm partners, financial service executives, a board’s desire to utilize all sources of expertise entrepreneurs, foundation heads and university and insight for its deliberations, as one means for presidents would constitute just a partial list of the a company to compete effectively in the global likely qualified candidates. marketplace. The gender imbalance also raises the questions of (i) full business utilization of CED’s Position female human resources; (ii) potential alienation of a firm’s female employee and supplier base; • Voluntary Goal Setting and Disclosure (iii) lack of attention to women, who make a large Many corporations seek to increase diversity at percentage of household purchasing decisions; the board level. This goal should be voluntary, (iv) missed opportunities to appeal to female retail rather than mandated by government quotas, and institutional investors; and (v) the ability which are in effect in several other countries. If of business to follow important social trends U.S. publicly traded companies set well-defined regarding gender. goals and provide regular disclosure on progress, they can build a pathway toward fulfilling this The Committee for Economic Development (CED) objective. If prominent corporations adopt a is at the forefront of business-oriented public policy target of recruiting women in one of every two groups in advocating that U.S. corporations bring board seat openings due to normal retirements more women onto their boards. In 2011, CED and existing female seats are retained, CED formed a Subcommittee on Women’s Economic believes that 30 percent participation would likely Contribution, composed of 18 prominent men and occur by 2018. women from the for-profit and nonprofit sectors, to study the issue and make recommendations. In • Expanding the Criteria for Directors 2012, CED issued a policy statement, “Fulfilling the Board-nominating committees and executive Promise: How More Women on Corporate Boards search firms, which often work for the Would Make America and American Companies committees, typically have excessively narrow More Competitive.” In this current paper, CED lists of qualifications for directors, in our provides updates on this topic and outlines its plan judgment. Therefore, potential female candidates for direct outreach to the nominating committees of face artificially high barriers. As a practical prominent corporate boards. business matter, CED suggests that boards expand their criteria for candidates, which CED’s research indicates that potential women will open up opportunities for women while board members face a “chicken and egg” problem. improving the quality of boards in several ways. Although there is little overt bias, boards tend

5 Every Other One: More Women on Corporate Boards

• Source of Women Board Members Outreach to Board Nominating Committees With these expanded criteria, female c-suite executives, divisional presidents, law firm CED’s past outreach included statements by its partners, accounting firm partners, financial Policy and Impact Committee, which supported service executives, entrepreneurs, risk seminars and hosted related panels at CED’s policy management professionals, foundation heads and conferences. A key goal was to place this issue in university presidents would provide a deep pool the business community’s mindset and to push for of likely qualified candidates. the 30 percent target by 2018.

• Direct Contact Supplements Existing Programs Our new outreach will focus on one-on-one contact Issue promotion, numerical monitoring, with nominating committee members and chairs, executive education, public pressure, and most of whom are male. CED’s 200+ trustees, 56 of shareholder resolutions place gender imbalance whom are women, are accomplished businesspeople in the corporate mindset. CED believes one- who can utilize their peer-to-peer networks to on-one dialogs among peers will accelerate explain the benefits of board diversity, and to progress. CED proposes to harness its trustees to encourage a fresh outlook about board candidates. arrange small group meetings with nominating CED will assist its trustees in the administration and committee members of prominent corporate implementation of this outreach, and will support boards. These conversations will focus on why supplementary seminars, luncheons, and dinners to diversity is slow and what business leaders can do highlight this program. to achieve progress. They will also capture best practices from those companies that are already making strides to bring women on boards.

Contact Information

Michael J. Petro Executive Vice President

Committee for Economic Development 2000 L Street, NW, Suite 700 Washington DC 20036

Work: 202-469-7815 Cell: 703-786-0828 Fax: 202-223-0776 E-mail: [email protected]

6 Introduction The Business Case for

In recent years, an increasing number of business- More Women on Boards oriented groups—and several organizations Increasing the percentage of directors who are founded to focus on this issue, such as the 30 women makes good business sense because it Percent Club, Thirty Percent Coalition, 2020 benefits corporations in several ways: Women on Boards, Women’s Forum of New York, Catalyst, Women Corporate Directors, and • Enhances performance and competitiveness Corporate Women Directors International—have • Conveys to female managers: no “glass ceiling” called for an increase in female membership on and opportunity for all prominent corporate boards. These efforts have • Aligns with stakeholders, affinity groups attracted blue-chip corporate support and have and customers brought increased media attention to the matter. • Aligns with societal norms However, success has been muted over the last ten • Anticipates and forestalls potentially years. A 2013 Catalyst Board Census showed that intrusive regulation women now occupy 16.9 percent of Fortune 500 • Responds to institutional stockholders board seats,1 up from 15.2 percent in 2008, and 13.6 percent in 2003. Other countries recognize these benefits and are pushing for more women on boards. This statement will consider the following aspects of this issue: Enhances Performance and Competitiveness

• The Business Case for More Women on Boards A case can be made that board diversity correlates • The Supply/Demand Dynamics for Women positively with enhanced corporate financial Directors performance, thus indicating that female board • International Progress members strengthen a company’s competitiveness. • CED’S Path Forward: The “Every Other One” Several studies support this reasoning, and further Initiative investigation is being done. However, the history of representation of women on corporate boards is relatively short. Researchers have difficulty in “isolating the impact of a single director, or a very small group of directors, on corporate performance.”2

The paucity of female representation on corporate boards is inconsistent with the need for broadened insights for board deliberations, which help a company compete effectively in the increasingly diverse global marketplace. The incorporation of more women on boards would also combat the “group-think” problem,3 whereby a homogeneous all-male board might, at times, fail to evaluate alternative viewpoints that could promote the company’s well-being. Some scholars have attributed group-think to governance failure of major corporations like Enron and Lehman

7 Every Other One: More Women on Corporate Boards

Brothers. Furthermore, with women making a Aligns with Stakeholders, Affinity Groups and large portion of the consumer purchasing decisions Customers in today’s economy, having female directors in board deliberations appears logical and consistent. With women representing over half of the U.S. The Committee for Economic Development labor force, many corporations have female (CED) believes male directors should play a role stakeholders as consumers, suppliers, and in examining this matter and engaging on the distributors. They make decisions that ultimately diversity issue. affect a company’s profit, share price, and overall image. Given their shared experiences with these Women now constitute a substantial portion of managers, women directors should be more in highly talented labor. That proportion is projected tune than male directors with the decision-making to grow. Female enrollment and degree awards processes of these corporate constituents. surpass those of males at the undergraduate and graduate level, and in the United States, women Correspondingly, female stakeholders may have an represent 35 percent of MBA enrollment.4As affinity for companies that show a willingness to the consultancy McKinsey has pointed out, the engage women as directors. These stakeholders might inclusion of more women in corporate leadership direct purchase orders, referrals, and investment roles expands the supply of skilled and motivated recommendations toward such companies, thus talent, which leads to potential performance gains. contributing to corporate success. CED believes certain businesses recognize this possibility and If the most prominent U.S. corporations fail to highlight women-director initiatives through their sufficiently integrate women into the workforce, U.S. marketing and public relations functions. Promoting competitiveness will be hurt by not utilizing the full board diversity for its own sake may thus enhance a potential of the labor pool. As the old sports maxim corporation’s reputation and boost returns. says, “You can’t win the game, if you leave half your players on the bench.” U.S. businesses may not be Enterprises specializing in the consumer market optimizing their human capital resources. note that women make approximately two-thirds of the buying decisions in the typical American Conveys to Female Managers: No “Glass Ceiling” household.6 By including women on boards, and Opportunity for All consumer-oriented firms can focus on this critical demographic at a strategic level. By including more women as directors, corporations signal to their female employees that opportunities Aligns with Societal Norms are available to them at the highest levels. The “glass ceiling”—i.e., the invisible barriers that As one researcher noted, “Arguments abound for an prevent women from reaching top jobs despite their increase in diversity in every profession including qualifications—is then weakened. By example and legal practice, medicine, academic, law enforcement, action, female directors are positive role models firefighting, and more.”7 Moreover, formerly male- for aspiring female managers. Finally, the pull from oriented pastimes, such as country clubs, city the top can have a powerful effect throughout the clubs, and similar organizations are, in many cases, various levels of a company. Diverse boards lead to a expanding access to include women. In 2012, for diverse senior management and diverse workforce. example, Augusta National Golf Club, site of the A recent study (2013) indicated that companies with prestigious Masters Tournament, admitted its first more female directors tend to have more women in two female members, after many years of defending corporate offices.5 its exclusionary practices. The prior restrictive membership policies of these organizations had the effect of excluding women from informal business

8 networking that sometimes took place therein, and of major economies to authorize quotas for female denying them the elevated status that accompanied directors on the boards of publicly held companies. such membership. By virtue of its prominence, CED believes that diversity goals should be achieved a Fortune 500 board is perhaps the ultimate voluntarily, rather than through government-mandated association in American business, yet, as this paper quotas. It is possible that the United States federal has noted, statistically such boards are behind the government could approve intrusive regulations if female inclusion trends evident in other sectors of U.S. businesses fail to address perceptions that they the economy and society. lag behind their international counterparts.

In fact, in 2014, 8 percent of Fortune 500 boards Currently, the U.S. Securities and Exchange have no women, 28 percent have one woman, and Commission (SEC) requires “disclosure of whether, 64 percent have two or more women, according to and if so how, a nominating committee considers Heidrick & Struggles. These figures are consistent diversity in identifying nominees for direction.”9 with Catalyst’s 2013 data. This disclosure is far from a legal requirement to appoint female directors, but it compels publicly CED and others believe that female-inclusive boards traded firms to acknowledge diversity in a formal help companies engage better with the societies in and highly legalistic manner. The latest empirical which they operate, and help restore public trust in analysis of Fortune 50 proxy diversity disclosures them as socially responsive institutions. In this sense, (2012), however, concluded that over half of CED advances a broader view of the corporation, i.e., diversity disclosures “fail to fully comply” with that corporations have certain responsibilities beyond these requirements.10 maximizing operating profits and shareholder returns. This expansive view of corporate roles has Absent meaningful progress, if U.S. companies been widely accepted by business executives, free- continue to ignore gender balance in the enterprise scholars, and courts. boardroom, the SEC rule could be a first step toward mandates. CED views mandates as unlikely, Anticipates and Forestalls Potentially but burdensome regulations could damage U.S. Intrusive Regulation competitiveness, and could force rigid behavior rather than good-faith exercise of judgment. Prominent businesspeople tend to think that U.S. What was intended to be a floor under female public companies are overregulated, and that representation could instead become a new overregulation hurts global competitiveness. Taking glass—or even a steel—ceiling above it. Thus, U.S. action to limit regulation is, therefore, desirable. companies should comply with the spirit of the Voluntary efforts regarding women on boards may disclosure, and the diversity objectives behind it, reduce the need for potentially intrusive government because this tactic makes business sense. mandates. Also, quotas lead to directors who are appointed to fulfill one requirement, and that notion Responsive to Institutional Stockholders leads to the impression of a two-tier board. The boards of publicly traded corporations As executive search firm Spencer Stuart pointed are ultimately accountable to the owners, i.e., out in its 2013 survey, 54 percent of the S&P 500 stockholders. For the largest publicly owned board respondents said they were looking for women corporations, ownership is diffused—spread among directors, but the actual percentage of new female many institutions and individual stockholders, directors was far lower.8 Although companies express with the largest owner representing a tiny fraction interest in expanding board diversity, their interest of the equity. Nonetheless, if a number of sizeable is not translating into results. Similar slow progress shareholders combine efforts, they can have has prompted national governments in a number influence on issues of corporate governance.

9 Every Other One: More Women on Corporate Boards

In 2012 and 2013, for example, a group of public employee state pension funds, led by CalPERS (the The Supply/Demand Dynamics California Public Employee Retirement System), for Women Directors worked with the 30 Percent Coalition (and several private money managers) to send letters to 137 Supply Dynamics Russell 1000 companies that lacked female directors (the year before, similar letters were sent to 41 of As noted, board chairmen, CEOs and board the S&P 500 without women directors). The letters nominating committees express an interest in encouraged board diversity, and the investors tried diversity, but they often say the small number of to engage in dialog with the firms. As a follow women on boards is due to the limited number of up, the institutional investors filed shareholder qualified female candidates. Our research suggests resolutions with over 20 of the companies for a that the nominating committees (and the executive vote at their annual meetings (most resolutions search firms working for the committees) have an were eventually withdrawn). Subsequently, 14 of excessively narrow list of director qualifications, so the 168 companies appointed a woman to their potential female candidates face an artificially high boards,11 which suggests that shareholder pressure barrier. Prerequisite qualifications for directors had a positive impact. “Corporate America doesn’t typically include: change overnight,” said an institutional investor who participated in the effort. • Sitting CEO of a publicly traded company • Retired CEO of a publicly traded company During the entire 2013 proxy season, shareholder • Existing board service on a publicly resolutions on board diversity were filed with 26 traded company companies, and 22 were withdrawn by mutual • Personal acquaintance with a current agreement.12 Three proposals went to a vote, and board member one won majority support (CF Industries).13 For the 2014 proxy season, activity on the board diversity Because women are underrepresented in all four front was similar to 2013. There were 26 resolutions, categories, they face a classic “chicken and egg” of which 18 were withdrawn. Three proposals went problem. Boards thus rationalize falling back into to a vote with an average shareholder support level customary behaviors that favor male nominees. of 31 percent. Three proposals are still pending, and two resolutions were filed at companies that To remedy this situation, CED believes that cancelled their meetings. nominating committees should expand their criteria slightly, to include female: The shareholder resolution is a useful tool for proactive institutional stockholders because it • C-suite executives provides leverage with boards, who generally try to • Divisional presidents limit annual meeting votes to a handful of items, such • Retired senior law firm attorneys as director re-election and executive compensation. • Retired accounting firm partners In exchange for the investor withdrawing the • Investment bankers and money managers resolution, the board might agree to revisit the • Entrepreneurs concept of appointing a female director. • Risk management, compliance and governance officers CED believes that strong voluntary efforts to • Management consultants include women would limit the filing of resolutions • Nonprofit, academic and public sector executives and would demonstrate corporate responsiveness to those stockholders that are concerned about gender imbalance in the boardroom.

10 One institutional investor told CED, “Boards have The average annual rate of increase in women to take a chance on a first-time woman director.”14 directors has been approximately 0.4 percent, or CED recognizes that prominent boards often roughly 22 additional seats per year. On this basis, prefer the “tried and true” in corporate governance the 16.9 percent in 2013 would climb to 30 percent matters, and that risk-taking in this area is frowned of Fortune 500 directors in 33 years (by 2046).18 upon by CEOs. Indeed, one director told CED, The math is as follows: 30 percent minus 16.9 “Boards exercise a lot of caution, since the new percent (or 13.1 percent) divided by 0.4 percent board member may serve 10 years or more. They (per year) equals 33 years. don’t want anyone who is disruptive, male or female.” Nonetheless, CED believes there are a If the average rate of increase doubles from 22 sizeable number of seasoned managers in these seats per year to 44 seats per year, the 30 percent ten categories. Finding a reasonable grouping of goal is reached in 2029, or 16 years. Clearly, a more qualified female candidates should not require focused effort is required to accelerate progress. excessive “vetting” or “heavy lifting” by the nominating committee, but these candidates may If the Fortune 500 adopts CED’s “Every Other fall out of the existing directors’ networks. One” initiative, 30 percent is achieved in four years. CED’s calculation assumes (i) all existing Demand Dynamics female board seats are retained; and (ii) the 2014 percentage is 17.3 percent (16.9 percent in 2013 It is unlikely that the demand for new Fortune 500 plus 0.4 percent equals 17.3 percent in 2014), or directors—either men or women—will increase 934 seats. CED’s goal suggests 162 new women in the short run. Most sitting directors are re- board seats per year (50 percent x 324 =162), nominated, and many remain on their boards which is added to the presumed 2014 total of 934 for long periods of time. An Ernst & Young (EY) seats. Reaching the goal of 30 percent (or 1,620 report indicated that 45 percent of board seats are seats) thus requires four years. The math is as held by directors with tenure of 10 years or more,15 follows: 1,620 seats minus 934 existing seats equals and that the turnover rate is dropping. 686 new seats needed for women to occupy 30 percent. 686 new seats divided by 162 new seats The median turnover rate for board members per year equals approximately four years. of prominent U.S. firms is seven percent per year, and the average number of board seats is 10.8 (about 5,400 seats in the Fortune 500), so a grouping of 100 board members will only see seven vacancies in a given year.16 However, about one percent of the seven percent reflects senior insider appointments (like a new CEO), of which women are underrepresented. This leaves just six percent, or 324 seats per year, available for new and independent directors (2013 was slightly below average with 298 independent seats17). In other words there is less than one new independent director for each company per year.

11 Every Other One: More Women on Corporate Boards

International Progress

Public Company and Board Statistics These data support the claim that women are representing an increasingly larger portion of Across the globe, there are tens of thousands of corporate boards globally. publicly traded companies, most of which are small compared to big U.S. firms. The MSCI ACWI Legal Mandates All Cap Index consists of 9,000 large, medium, and small capitalization corporation segments Belgium, France, Iceland, Italy, the Netherlands, in 46 developed and emerging markets. Forbes Norway, and Spain currently have government- publishes an annual ranking of the top 2,000 public mandated quotas. Additionally, a number of other companies in the world. The Fortune Global 200 is developed economies, such as Australia, Germany, another listing of blue-chip international firms. The Sweden, and the United Kingdom, have “comply Fortune 500 reflects only U.S.-based firms (which, or explain” arrangements. Comply or explain” of course, generally have international operations). regulations fall short of mandates, but they require To compare size, the median equity market value of public disclosure of why government-suggested the Fortune 500 is $35 billion as of July 2014. The approaches were not followed. Among sizeable median equity value of the CAC 40 (the 40-firm emerging markets, India and Malaysia have French stock index) is $15 billion, and that of the quotas. The European Parliament passed a quota Norwegian stock index (25 firms) is $4 billion.19 proposal in November 2013, and the Council of the European Union is reviewing it. Germany, the According to the European Commission (EC), in largest EU economy, has recently contemplated 2013 the average share of women on boards of the quota proposals, but has not passed one into law. largest publicly listed companies—segmented by the largest in each of the 28 member states—was 17.8 percent, a rise of 3.3 percent over the prior three years (the U.S. Fortune 500 was 16.9 percent). In five countries—Finland (29.8 percent), France (29.7 percent), Latvia (28.6 percent), Sweden (26.5 percent), and the Netherlands (25.1 percent)— women accounted for at least a quarter of board members.20 In the United Kingdom (U.K.), women occupy 20.7 percent of FTSE 100 board seats, versus 12.5 percent three years ago.21 Norway is not an EC member, but women hold 40 percent of public board seats, a percentage mandated by a 2003 law.

In June 2014, Corporate Women Directors International (CWDI) published its annual study, which showed that the percentage of female board directors is now 17.3 percent among the Fortune Global 200 companies, compared to 10.4 percent in 2004. This gain has been attributed to government-mandated quotas in several countries, rather than gradual, voluntary measures.22

12 CED’s Path Forward

The adaptability and cultural diversity of the CED’s trustee experience in the boardroom American economy have contributed to its past suggests that the fastest way to achieve change economic development, and now are critical to is for a peer to have a face-to-face meeting increase its global competitiveness. Women have with a nominating committee chair. Privately, successfully integrated into the workforce and have the business case can be presented for women contributed significantly to economic activity. A directors, opposing points of view can be debated, heightened presence of women in board rooms will and a diversity request can be made. One executive continue this progression and enhance our nation’s search consultant told CED, “There are just two ability to match up against international rivals. degrees of separation between every pair of Fortune 500 directors.” If that is the reality, the CED believes there is no self-correcting leveraging of CED’s trustees will enable CED mechanism to resolve the gender imbalance, and to reach inside the nominating committees therefore the problem will not fix itself. Business of multiple Fortune 500 companies within a leaders must be proactive toward the problem, with reasonable period of time. a vision toward avoiding intrusive government quotas or mandates. Ultimately, CED hopes that these prominent firms will consider nominating women for at least Publicizing the issue, monitoring numerical half of their newly open board seats, i.e., where advances, educating stakeholders, applying public the incumbent is not being re-nominated. If pressure, and introducing shareholder resolutions companies follow this guideline of “Every Other have “moved the needle” over the last 10 years. One,” the Fortune 500 should have a 30 percent Many organizations have acted, particularly in female board representation by 2018, just four the last few years, and women now represent 16.9 years from now. percent of Fortune 500 board seats, versus 13.6 percent ten years ago. Accelerating this headway requires these tactics and more.

As part of its singular efforts, CED intends to mobilize its 200+ trustees to begin dialogs with nominating committees and their respective chairmen through small group meetings. At present, CED trustees occupy seats on 66 Fortune 500 boards, and their business colleagues represent inroads to many other boards. Our goal is to meet with 25 representatives of nominating committees per year for the next three years. The conversations will focus on why diversity is slow and what business leaders can do to achieve progress. After the first year, CED proposes to publish a paper, without attribution, on nominating committee concerns. CED intends to partner with other public policy groups and business-sector organizations as needed.

13 Every Other One: More Women on Corporate Boards

Endnotes

1. The 2013 Catalyst Census (2013). Retrieved from 11. See www.30percentcoalition.org/initiatives. http://www.catalyst.org/knowledge/2013-catalyst- 12. CED interview with ISS Governance, a leading proxy census-fortune-500-women-board-directors. Several firm, June 12, 2014. executive search firms and non-profits also publish board statistics from time to time. 13. CF Industries Holdings, Inc. (2014, April 3). Form DEF 14A, Proxy Statement Pursuant to Section 2. Bilimoria, D. (2006). The Relationship Between 14(a) of the Securities Exchange Act of 1934. Women Corporate Directors and Women Corporate Retrieved from http://phx.corporate-ir.net/phoenix. Officers. Journal of Managerial Issues, 18(1), 47-61. zhtml?c=190537&p=irol-sec Retrieved from http://www.jstor.org/stable/40604524 14. CED interview with institutional investor, June 1, 3. Bohdanowicz, L. (2012). Ownership Structure of 2014. Female Directors on Two Tier Boards, Evidence from Polish Listed Companies. University of Lodz, 15. EY (2014). Diversity Drives Diversity: From the Department of Business Management. Retrieved Boardroom to the C-Suite. Retrieved from http:// from http://ssrn.com/abstract=2117870 www.ey.com/US/en/Issues/Governance-and- reporting/Diversity-drives-diversity 4. Lavelle, L. (2013, March 13). Even With a Female Dean, Most MBAs Are Still Men. Bloomberg 16. CED interview with Heidrick & Struggles, June 25, Businessweek. 2014; CED calculations. 5. Barsh, J., Nudelman, S., and Yee, L. (2013, April). 17. The Spencer Stuart Board Index (2013). Retrieved Lessons from the Leading Edge of Gender from https://www.spencerstuart.com/research-and- Diversity. McKinsey Quarterly. A yet unpublished insight/spencer-stuart-us-board-index-2013 study on Norwegian boards (June 2014) supports this 18. CED calculations, beginning with 913 female board notion at high levels but less so at lower ranking jobs. seats in 2013 and assuming 934 seats (17.3%) in 2014. 6. FleishmanHillard (2013, July). Women, Power 19. CED interview with Linn Furwald, Oslo Stock & Money: A Study of Women’s Lives, Lifestyles Exchange, June 5, 2014. and Marketplace Impact. Retrieved from http:// fleishmanhillard.com/wp-content/uploads/meta/ 20. European Commission (2014, March). Gender resource-file/2013/women-power-money-white- Balance on Corporate Boards: Europe is Cracking paper-1374761552.pdf the Glass Ceiling. Retrieved from http://ec.europa. eu/justice/gender-equality/files/documents/140303_ 7. Branson, D. (2012). Initiatives to Place Women on factsheet_wob_en.pdf. (Note that the study focuses Corporate Boards of Directors – A Global Snapshot. on the higher-level supervisory board—including The Journal of Corporation Law, 37(4), 797-814. chair, executive director, senior executives and Retrieved from http://blogs.law.uiowa.edu/jcl/ employee representatives, where present—when an current-issue/ EC firm has two boards). 8. The Spencer Stuart Board Index (2013). Retrieved 21. Vinnicombe, S., Doldor, E. and Turner, C. (2014). from https://www.spencerstuart.com/research-and- The Female FTSE Board Report 2014: Crossing insight/spencer-stuart-us-board-index-2013 the Finish Line. Cranfield International Centre 9. Securities and Exchange Commission Proxy for Women Leaders, Cranfield University School Disclosure and Enhancements, 17 C.F.R. §§ 229, 239, of Management. Retrieved from http://www.som. 240, 249 and 274 (2009). cranfield.ac.uk/som/ftse 10. Smallman, T. (2013). The Glass Boardroom: The SEC’s 22. Corporate Women Directors International (2014, role in Cracking the Door Open so Women May June). Women Board Directors in the Fortune Global Enter. Columbia Business Law Review, 2013(3), 801. 200: 2004 – 2014.

14 CED Trustees

Co-Chairs Joseph Gantz Donald K. Peterson James Bacchus Managing Director & COO Chairman and Chief Partner Carl T. Camden Pine Brook Road Partners, Executive Officer (Retired) Greenberg Traurig, LLP President and Chief LLC Avaya Inc. Executive Officer Bernard C. Bailey Kelly Services, Inc. Patrick W. Gross James E. Rohr Chairman and CEO Chairman Executive Chairman Authentix, Inc. Maggie Wilderotter The Lovell Group (Retired) Chairman and Chief PNC Financial Services Douglas M. Baker Executive Officer Hollis W. Hart Group, Inc. President and Chief Frontier Communications Head of International Executive Officer Franchise Management Patricia F. Russo Ecolab Inc. Citi Chief Executive Officer (Ret.) Barbara M. Barrett Jack A. Hockema Alcatel-Lucent President and Chief Executive Committee Chairman, President & Technologies, Inc. Executive Officer CEO Triple Creek Guest Ranch Beth A. Brooke-Marciniak Kaiser Aluminum Jacob J. Worenklein, Esq. Global Vice Chair, Public Corporation Chairman & CEO (Retired), George S. Barrett Policy US Power Generating Chairman and Chief EY D. Bryan Jordan Company; Executive Officer Chairman, President and Partner & Co-Head of Cardinal Health, Inc. Michael Chesser CEO Global Projects Chairman and CEO First Horizon National Akin Gump Strauss Hauer Anthony A. Barrueta (Retired) Corp. & Feld LLP Senior Vice President, Great Plains Energy, Inc. Government Relations Joseph E. Kasputys Kaiser Foundation Health Robert H. Colson, Ph.D. Chief Executive Officer Plan, Inc. Distinguished Lecturer of Economic Ventures, LLC Members Accountancy Chris Bart Baruch-CUNY Robert J. Kueppers Founder and Lead Faculty, Senior Partner - Global Linda L. Addison The Directors College; W. Bowman Cutter Regulatory & Public Policy Managing Partner CEO, Corporate Missions Senior Fellow and Director, Deloitte LLP Norton Rose Fulbright Inc. Economic Policy Initiative The Roosevelt Institute Lenny Mendonca Michael G. Archbold Dominic Barton Director Emeritus Chief Executive Officer Managing Director William T. Esrey McKinsey & Company, Inc. GNC Holdings, Inc. McKinsey & Company, Inc. Chairman Emeritus Sprint Corporation Deborah Hicks Midanek Tom Armstrong Lydia I. Beebe Chairman and CEO Chief Executive Officer Corporate Secretary Roger W. Ferguson, Jr. Solon Group, Inc. Duer Carolina Coil, Inc. Chevron Corporation President and Chief Executive Officer Ronald P. O’Hanley Ian Arnof Peter A. Benoliel TIAA-CREF Former President, Asset Chairman Chairman Emeritus Management Arnof Family Foundation Quaker Chemical Henrietta H. Fore Fidelity Investments Corporation Chairman Paul Atkins Holsman International Debra Perry Chief Executive Officer David L. Bere Non-Executive Director Patomak Global Partners, Chairman and CEO Korn Ferry International, LLC Nonni’s Foods, LLC Inc.

15 Every Other One: More Women on Corporate Boards

Nomi M. Bergman John J. Castellani Mike L. Davis Diana Farrell President President and Chief Executive Vice President, Global Leader & Bright House Networks Executive Officer Global Human Resources Co-founder, The McKinsey Pharmaceutical Research General Mills, Inc. Center for Government Andrea Bierce and Manufacturers of McKinsey & Company, Inc. Managing Director America Michelle Finneran Gupton Marrs Dennedy Robin A. Ferracone International, Inc. Hiram E. Chodosh Vice President & Chief Chief Executive Officer President Privacy Officer Farient Advisors Shideh Sedgh Bina Claremont McKenna McAfee, Inc. Partner College Barbara Flanagan Insigniam Robert L. Dilenschneider President Joseph P. Clayton Founder and Principal Caledonia Partners Lee C. Bollinger President and Chief The Dilenschneider Group, President Executive Officer Inc. Howard Fluhr Columbia University DISH Chairman William H. Donaldson The Segal Group Angela Braly Cynthia Cleveland Chairman President & Founder CEO and Founder Donaldson Enterprises Margaret Foran The Braly Group, LLC Broadthink/BroadLit Vice President, Chief Frank P. Doyle Governance Officer and Sean Bratches Abby Joseph Cohen Executive Vice President Secretary Executive Vice President, President, Global Markets (Retired) Prudential Financial Sales and Marketing Institute General Electric Company ESPN Goldman Sachs Group Inc. Barbara Hackman Franklin Robert H. Dugger President and CEO Neri Bukspan Cynthia Cohen Founder and Managing Barbara Franklin Partner, Financial President Partner Enterprises; Accounting Advisory Strategic Mindshare Hanover Provident Capital Former Secretary Services LLC US Department of EY Martin Cohen Commerce Managing Director and T. J. Dermot Dunphy Dave Burwick Corporate Secretary Chairman Susan H. Fuhrman CEO Morgan Stanley Kildare Enterprises, LLC President, Peet’s Coffee & Tea Inc. Teachers College Douglas R. Conant Wade Dyke Columbia University Michael M. Byram President and CEO President CEO (Retired) (Retired) Kaplan, Inc. Troy Gayeski University of Colorado Campbell Soup Company Partner and Senior Foundation Terry Eakin Portfolio Manager Kenneth W. Dam Chairman Emeritus SkyBridge Capital Donald R. Caldwell Max Pam Professor EYA, LLC Chairman & Chief Emeritus of American E. Gordon Gee Executive Officer & Foreign Law & Senior Robert Eck President Cross Atlantic Capital Lecturer President and Chief West Virginia University Partners The University of Chicago Executive Officer Anixter International Inc. Thomas P. Gerrity, Jr. Teresa Carlson Mitch Daniels Joseph J. Aresty Professor Vice President, General President Janice Ellig of Management Public Sector Purdue University Co-Chief Executive Officer The Wharton School of the Amazon Web Services Chadick Ellig University of Pennsylvania Julie Hembrock Daum Gerhard Casper Partner and Head of the Gerri Elliott Raymond V. Gilmartin President Emeritus and North American Board Executive Vice President, Chairman, President & Professor of Law Practice Chief Customer Officer CEO (Retired) Stanford University Spencer Stuart Juniper Networks, Inc. Merck & Co., Inc.

16 Alfred G. Goldstein Lloyd W. Howell, Jr. Richard J. Kramer Eugene A. Ludwig President and CEO Executive Vice President Chairman, CEO & Founder & Chief Executive AG Associates Booz Allen Hamilton Inc. President Officer The Goodyear Tire & Promontory Financial Timothy B. Goodell R. Glenn Hubbard Rubber Company Group General Counsel Dean and Russell L. Carson Hess Corporation Professor of Finance and Randall S. Kroszner Tom Maddison Economics Norman R. Bobins Chief Human Resources Bill Goodwyn Columbia University Professor of Economics Officer President & CEO University of Chicago Xerox Corporation Discovery Education Henry G. Jackson President and Chief Barbara J. Krumsiek Deborah Majoras Patricia Gottesman Executive Officer Chair, President and CEO Chief Legal Officer and Advisory Board Chairman Society for Human Calvert Investments Secretary Ninah/Publicis Resource Management The Procter & Gamble Thomas F. Lamb, Jr. Company Earl G. Graves, Jr. Jeremy M. Jacobs, Jr. Senior Vice President, President & CEO Principal Government Affairs Kathy Marinello Black Enterprise Delaware North PNC Financial Services Chief Executive Officer Companies, Inc. Group, Inc. Stream Global Services Barbara B. Grogan Chairman Emeritus Lou Jacobs David H. Langstaff Bruce K. MacLaury Western Industrial Principal President and Chief President Emeritus Contractors Delaware North Executive Officer (Retired) The Brookings Institution Companies, Inc. TASC, Inc. Ronald Grzywinski T. Allan McArtor Chairman Emeritus Larry Jensen Frank G. LaPrade Chairman ShoreBank Corporation President & CEO Chief Enterprise Services Airbus Americas, Inc. Cushman & Wakefield/ Officer and Chief of Staff to Judith H. Hamilton Commercial Advisors the Chairman and CEO Daniel J. McCarthy President and Chief Capital One Financial President and Chief Executive Officer (Retired) Jeffrey A. Joerres Corp. Operating Officer Classroom Connect Executive Chairman Frontier Communications ManpowerGroup Gregory E. Lau Robert P. Haney, Jr. Managing Director-Board Alonzo L. McDonald Partner Andrea Jung of Directors Practice Chairman and Chief Covington & Burling LLP President and CEO RSR Partners Executive Officer Grameen America, Inc. Avenir Investment Corp. Kathy Hopinkah Hannan James A. Lawrence National Managing Pres Kabacoff Exec. Vice President and Martha McGarry Partner, Global Lead Co-Chairman of the Chief Financial Officer Partner Partner Board of Directors & Chief Northwest Airlines Skadden, Arps, Slate, KPMG LLP Executive Officer Corporation Meagher & Flom LLP HRI Properties Ben W. Heineman, Jr. Dawn G. Lepore Patricia A. McKay Senior Fellow, Schools of Edward A. Kangas Former Chairman and Partner Law & Government Chairman and Chief Chief Executive Officer Templeton & Co. Harvard University Executive Officer (Retired) drugstore.com, inc. Deloitte Touche Tohmatsu Mark D. McLaughlin Roderick M. Hills, Esq. David M. Lockton Chairman, President, and Chairman Ronald J. Klein Chairman of the Board CEO Hills Stern & Morley LLP Partner Lockton Companies Palo Alto Networks Holland & Knight LLP Lisa A. Hook Linda E. McMahon President and CEO Principal NeuStar McMahon Ventures

17 Every Other One: More Women on Corporate Boards

Robert W. Mendenhall, Hilda Ochoa-Brillembourg Steven C. Preston Stephen W. Sanger Ph.D. President and Chief CEO Former Chairman and President Executive Officer Livingston International Chief Executive Officer Western Governors Strategic Investment Group Inc. General Mills, Inc. University Steve Odland Doug Price Maria A. Sastre Harvey R. Miller, Esq. Chief Executive Officer President and CEO President and Chief Partner Committee for Economic Rocky Mountain PBS Operating Officer Weil, Gotshal & Manges Development Signature Flight Support LLP Thomas J. Quinlan III John F. Olson President and CEO Dean A. Scarborough Alfred T. Mockett Partner RR Donnelley President and Chief Chairman Gibson, Dunn & Crutcher Executive Officer The Hibu Group LLP Catherine Reynolds Avery Dennison President & CEO Paul M. Montrone Nels Olson Catherine B. Reynolds Mary Schapiro Chairman Vice Chairman and Co- Foundation Advisory Board Vice Chair Liberty Lane Partners Leader, Board and CEO Promontory Financial Practices R. Timothy Rice Group, LLC Nicholas G. Moore Korn/Ferry International, Chief Executive Officer Director Inc. Cone Health George Schindler Bechtel Group, Inc. President, U.S. and Canada Steffen E. Palko Bill Richards CGI Jennifer Nason President and Vice President Global Chairman, Chairman (Retired) SUNY Orange Elliot S. Schreiber, Ph.D. Technology, Media and XTO Energy Inc. Chairman Telecommunications Alice M. Rivlin Schreiber Paris, LLC Investment Banking Carol J. Parry Senior Fellow, Economic J.P. Morgan Chase & Co. President Studies Larraine Segil Corporate Social The Brookings Institution Chairman Diana S. Natalicio, Ph.D. Responsibility Associates The Committee of 200 President Michael Robinson Foundation The University of Texas at William C. Pate Chief Executive Officer El Paso Co-President Broadview Networks John E. Sexton Equity Group Investments, President Thomas C. Nelson LLC Daniel Rose New York University Chairman, President & Chairman CEO Gregg Petersmeyer Rose Associates, Inc. Jane Sherburne National Gypsum Chairman and CEO Principal Personal Pathways, LLC Nathan O. Rosenberg Sherburne, PLLC Susan Ness Founding Partner - Senior Fellow, Center for Peter G. Peterson California Gregg Sherrill Transatlantic Relations Founder and Chairman Insigniam Chairman and Chief Johns Hopkins School of Peter G. Peterson Executive Officer Advanced International Foundation Landon H. Rowland Tenneco, Inc. Studies Chairman of Lead Bank Todd E. Petzel and Ever Glades Financial Gary Shorb Laurie Nordquist Managing Director and President and CEO Executive Vice President, Chief Investment Officer Edward B. Rust, Jr. Methodist Healthcare Institutional Retirement Offit Capital Advisors LLC Chairman and CEO Corporation and Trust State Farm Insurance Wells Fargo & Co. Sally Phipps Companies Frederick W. Smith Director, Global Chairman, President and Justus J. O’Brien Contributions Nina Saberi CEO Partner Colgate-Palmolive Managing Partner FedEx Corporation Egon Zehnder Company Castile Ventures

18 Richard K. Smucker Frederick W. Telling, Ph.D. James S. Turley Scott Wieler President and Co-Chief Vice President, Corporate Chairman and Global Chairman Executive Officer Policy & Strategic Chief Executive (Retired) Signal Hill The J. M. Smucker Management (Retired) EY Company Pfizer Inc John C. Wilcox Myron E. Ullman, III Chairman Jeffrey Sonnenfeld Davia B. Temin Chief Executive Officer Sodali Ltd. Senior Associate Dean, Yale President and Chief JCPenney Company, Inc. School of Management Executive Officer Harold M. Williams Yale University Temin and Company Daisy Vanderlinde President Emeritus Incorporated Chief Human Resource Getty Trust Robert J. Stanzione Officer Chief Executive Officer, G. Richard Thoman GNC Ronald A. Williams Chairman Chairman Chairman and Chief Arris Group Inc. Corporate Acquirers, Inc. Robert S. Walker Executive Officer Executive Chairman RW2 Enterprises Scott Steffey Larry D. Thompson Wexler & Walker Public President and CEO EVP Government Affairs, Policy Associates Michael Willoughby Career Education Corp. General Counsel & Chief Executive Officer Corporate Secretary Ben Walter Pfsweb Inc. Jon Stellmacher PepsiCo, Inc. CEO Senior Vice President Hiscox USA John B. Wood (Retired) Patrick Toole Chief Executive Officer and Thrivent Financial for Portfolio Management & Delroy Warmington Chairman of the Board Lutherans Offering Development Managing Partner Telos Corporation IBM Corporation Delwar Capital Paula Stern Management LLC David R. Young Chairwoman Tallman Trask, III Executive Chairman The Stern Group, Inc. Executive Vice President Christine B. Whitman Oxford Analytica Duke University Chairman, CEO, and Roger W. Stone President Ronald L. Zarrella Chairman and CEO Sara M. Tucker Complemar Partners, Inc. Chairman Emeritus KapStone Paper and CEO Bausch & Lomb Packaging Corp. National Math + Science Jon Whitmore Incorporated Initiative Chief Executive Officer Stephen M. Swad ACT, Inc. President & CEO Rosetta Stone

19 Every Other One: More Women on Corporate Boards An Update of a Policy Statement by the Committee for Economic Development’s Policy & Impact Committee

Includes bibliographical references. First printing in bound-book form: 2014 Printed in the United States of America

Committee For Economic Development 2000 L Street, N.W., Suite 700 Washington, D.C., 20036 202.296.5860 www.CED.org