As one corporate scandal leads to another, a question arises in the background: Is there a connection between the lack of gender diversity in the top ranks of many companies and the recent downfall of a few?
Of course women don’t have an exclusive claim on moral high ground. Probes into Martha Stewart’s stock dealings highlight the fact that women’s actions aren’t above scrutiny.
And corporate boards aren’t devoid of women. Enron and WorldCom each had one (Wendy Gramm and Judith Areen, respectively).
But some observers suggest that more diversity on corporate boards might have changed some of the decisions that led to bankruptcy for both companies–WorldCom just filed this week–and fallout for investors.
“More women in the boardroom might have produced different outcomes,” says Nancy Evans, co-founder and editor in chief of iVillage, who was in Chicago last week to speak at the Trailblazer Roundup of Women in Corporate America, a conference organized by the Business Women’s Network in Washington, D.C. “Women tend to be straight talkers and sensible problem solvers and they raise the flag if something doesn’t add up.”
There is no question that women are under-represented on corporate boards and in senior management. According to the research organization Catalyst, in 1993 women made up 8.3 percent of the people who sat on corporate boards. By 2001, that number had risen to 12.4 percent. There are six female CEOs in Fortune 500 companies and 11 in Fortune 1,000 companies.
Patricia Farrell, a psychologist and consultant based in Englewood Cliffs, N.J., says she strongly believes that more women in top spots might have made a difference at Enron and WorldCom. Farrell says that because women have been socialized to be nurturers, they often feel a strong obligation to maintain people’s trust. Conversely, men are trained to focus on winning, which in corporate America translates to making money.
“Women tend to have a sense of the fairness of the game,” she says, “and a sense of the feelings of others, to look out for others. … That’s not to say men don’t have that, but women may be more verbal in their sense of concern and caring for others.”
A `more humanitarian’ perspective?
Barry Maher, a consultant based in Santa Barbara, Calif., puts it this way: “Do women bring a more humanitarian perspective to things, get less caught up in testosterone and looking out for No. 1? That’s probably the case in general.”
Maher thinks gender diversity on corporate boards, like ethnic diversity, is crucial. When boards become clubs whose only members are privileged white males, they become “astonishingly isolated,” he says.
“They see themselves as a breed apart and are oblivious to what’s going on in the trenches. It’s been a long time since they’ve left a meeting and had to catch a bus or realized that $100 can be a lot of money to someone.
“They talk about teamwork but the guy making $20,000 is not exactly on the same team as the CEO earning $20 million. They [at the top] look out for each other and it’s very easy for them to lose sight of the interests of the people who actually do the work, to lose sight of anything but the bottom line. So they absolutely think they are doing the right thing by maximizing the short-term stock value.”
On corporate boards that have any women, their status as the minority or newcomer affects their behavior as well as the men’s, sometimes in positive ways.
“We’ve been on the outside of the powermaking circle so long, it’s easier to step back and say, `I have a question about what’s going on,'” says Carol Frohlinger, a Trailblazer conference participant, entrepreneur and volunteer for Where are the Women?, run by Women on the Job, an advocacy group in Port Washington, N.Y.
The intimidation factor
But placing the burden of speaking up on so few shoulders is risky, she says. A lone female board member may find it hard to voice dissent.
“One woman isn’t enough to carry the load. If there were two or three, they could ask each other, `Are you hearing what I’m hearing?'” Frohlinger says.
If they do express dissent, they may be attacked, Farrell adds. “Corporations don’t like to be reminded that what they’re doing borders on the unethical,” she says. Or their concerns may be brushed aside, as was the case with Sherron Watkins, the Enron vice president, when she warned of the firm’s risk of collapse.
Patrick E. Murphy, director of the Institute for Ethical Business Worldwide at the Mendoza College of Business at the University of Notre Dame, agrees boards need more than a single female voice. “It’s hard for one person by him or herself to make a difference,” he says. “Adding a woman to a board wouldn’t help nearly as much as having a critical mass of women … of adding two or three.
“I don’t want to sound stereotypical … but women generally bring the characteristics of caring and collaboration to the table. And business desperately needs that.”
Evans says there’s no shortage of qualified women to sit on boards. “There is a critical mass of women who have corporate experience and who have the courage to speak up. Why aren’t there more [women at the top]? Ask the men.”
Both genders vulnerable
But not everyone agrees that women’s presence might have prevented these corporate disasters. Susan Schanlaber, entrepreneur and former chairman, president and CEO of Aurora National Bank, now Banco Popular, isn’t convinced that having more women on the boards would have made a significant difference.
“There was incredible pressure–that grew throughout the ’90s–from the investment community for companies to be highly profitable, to perform for the shareholders, and ultimately the board represents the shareholders,” says Schanlaber, who now heads the Landmark Group of Companies in Aurora.
When companies started delivering those profits, everyone was on a high, she says.
“Some board members became enamored of their own success and lost track of where they came from,” she says. “It’s easy to be swept up in this, and women and men are equally susceptible.”
Nell Minow, editor of The Corporate Library (www.thecorporatelibrary.com), a watchdog Web site covering corporate governance, points out that in a culture in which candidates for the board must be team players–meaning they don’t make too many waves–“the women who have made it on … are people who are good at what is at best termed `consensus-building’ and at worst a kind of lowest common denominator.
“The problem is not whether enough women are on the board. The problem is whether the right women–and men–are on the board.”
Opting out of corporate circles
Meanwhile, though, there has been a steady contingent of women who have defected from corporate America and decided to chart their own entrepreneurial course. If women can make the choice, says Farrell, many find “it’s better to struggle and work for your own business rather than someone else’s, and then corporations lose out.”
According to research from the Center for Women’s Business Research in Washington, D.C., 1 in 18 adult women in the U.S. is a business owner. Though men are more likely than women to be business owners, female entrepreneurship has been growing at twice the national average since 1997.
Says Sharon Hadary, the center’s executive director: “There is no question in my mind that there is a push-pull going on [with women and corporate America]. The pull comes from the entrepreneurial idea. The women have a sense of `I can do this on my own and do it better.’
“The push stems from their frustration with corporate life. Their main complaint is a lack of flexibility and the second is a lack of access–access to training, expertise and knowledge, and access to the top levels of the company, in terms of having an influence on the organization and its direction.”
Buttressing the argument that women do strive to create new ways of working is a study from the Center for Women’s Business Research in which 650 women entrepreneurs were asked what they did differently upon running their own shows.
The top three answers: provide flexibility for their employees; treat employees fairly; and make an effort to listen to and respect employees’ opinions.
Changing corporate America ultimately hinges on the bottom line–for companies and for consumers.
“Companies are realizing that the primary consumer is often a woman,” Evans says. “For example, 60 percent of car purchases are made by women. If you want to sell to women, you need women in the organization.”
Frohlinger also believes women have a responsibility to make their voices heard. If women make the majority of consumer purchasing decisions, they should ask themselves whom they’re buying from, as well as investing in. “Would I feel better as an investor knowing the board had diversity so that the board would guide executive management to make the best decisions? With good decisions, your investment goes up.”
Frohlinger says that, according to the National Association of Securities Dealers, women make up 47 percent of investors overall and 35 percent of investors with holdings of more than $50,000 in mutual funds and stocks.
“Why aren’t we using our economic power to ask questions of corporate America?” she asks. “Because we haven’t been educated that a) we have this power and b) it’s important to each of us to exercise it.”
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E-mail: jfitzgerald@tribune.com
