Excessive executive compensation packages and pay-offs often occupy the business headlines. But in these last few weeks another corporate governance “elephant in the room” has dominated: under-representation of women on company boards.
On December 10th, hot on the heels of Twitter’s announcement that it hired Dame Majorie Scardino as its first female board member, General Motors announced that Mary Barra will become the car giant’s new CEO. Ms. Barra, the car industry’s “golden girl,” has spent her entire career working for GM and made her mark during the last three years as GM’s head of global product development. During that time, GM’s profits and share price have looked healthy (the company emerged from Chapter 11 bankruptcy protection in 2009), partly due to innovative product development in the U.S. for which Ms. Barra takes credit and has ultimately been awarded.
Ms. Barra and Dame Scardino are a rare breath of fresh air in a largely (and depressingly) “macho” corporate executive world, having both taken top positions in male-dominated industries. According to the 2012 Catalyst Consensus released a few days ago, in 2012 women made up only 16.6% of Fortune 500 boards and occupy only 14.3% of executive-office positions. But with Ms. Barra’s high profile promotion, will this set an example that will help bring about change, particularly following the controversy leading up to Dame Scardino’s appointment?
Time will tell, but as the call for greater board diversity increases, Europe and the United States see different solutions to the problem of underrepresentation of women on boards. Europe is leaning towards mandatory quotas (E.U. legislators recently backed draft rules which would require 40% representation on all large E.U. listed companies). In the United States however, the reaction to the problem has been slower. The preference seems to be supporting and encouraging greater representation, with efforts led more by institutional investors than by government.
With evidence indicating that companies with more women on their boards out-perform those with fewer, perhaps Europe will steal a march on the United States, with highly skilled “board-ready” U.S. women looking to Europe to continue their careers. Legislating for quotas may be a blunt and undesirable instrument. But perhaps, with the assistance of the examples set by Ms. Barra and Dame Scardino, the results that seem likely to follow will help focus greater attention on the issue in the United States—the bottom line—by translating the issue into the language corporations best understand.
Dominic Pearson is an attorney (solicitor) admitted to practice in England and Wales. Before embarking on his LL.M. degree at Berkeley, he practiced for a number of years at two major law firms in London.