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What happens when there are more women than men in the boardroom?

More women on boards means "behavior and conduct in a company are balanced," one recruitment expert said.
Image: General Motors CEO Mary Barra Gives Business Update At Fort Wayne Assembly Plant
For the first time in its 110-year history, General Motors now has more women than men on its board.Joshua Lott / Getty Images

For the first time in its 110-year history, General Motors now has more women than men on its board. It's a sea change in the clubby, tight-knit world of corporate boards, where members are typically drawn from the ranks of former chief executives, but it represents a rising trend in corner suites across the globe.

When two male directors retired from the GM board on Wednesday, the company joined a small club of companies with predominantly female boards. They include advertising giant Omnicom, Viacom, and Best Buy, according to the data-tracking company MSCI. In addition, 19 other companies in the S&P 500 would have majority-women boards if they added one more female, as Bloomberg recently reported.

In the fall of 2018, CBS added several women to its 11-person board. The move came soon after Chief Executive Officer Les Moonves stepped down in the wake of sexual harassment allegations.

Two of those new women directors at CBS, Barbara Byrne, a vice chairman of investment banking at Barclays, and Candace Beinecke, the first woman to chair a major New York law firm, were instrumental in enforcing corporate governance rules that denied Moonves $120 million in severance payments, according to two people familiar with the board who were not authorized to speak publicly.

“Board oversight of culture is becoming more important," said Paula Loop, who leads the governance insights center of the consulting firm PwC, which provides advice to corporations on good practices. "In many cases the female members of the board are the first ones who bring it up.”

Globally, women held 21.6 percent of all directorships last year, up from 20.4 percent, according to data from MSCI. U.S.-based companies did even better, with 23.4 percent of directorships going to women, versus 21.7 percent last year.

More women on boards “will make sure that behavior and conduct in a company are balanced," said Janice Ellig, chief executive of Ellig Group, an executive recruitment firm. She argues that boards with women perform better. "Women are known as great whistle-blowers,” she said, pointing to CBS as an example and to the rise of the MeToo movement, which has pushed for better treatment of women in the workplace.

Gender diversity on company boards has also become a more important consideration for investors: PwC’s annual director survey showed that companies are under increasing pressure to make changes. Research cited by Vanguard shows boards with “a critical mass” of women perform better than those without.

Last year, activist investors forced baby clothing retailer Destination Maternity to bring on a new slate of directors, including three women and a new female CEO, to ensure more equitable representation on the board. California ruled last year that it would levy financial penalties on companies that didn’t have at least one woman on their board, and encouraged larger boards to nominate three or more.

State Street Global Advisors, which came up with the marketing effort “Fearless Girl,” a statue of a little girl in front of the famous snorting bull figure close to Wall Street, said it would vote against directors who didn’t live up to a company's gender diversity program. Institutional Investor reported that 300 companies had added women since State Street’s initiative in 2017.

All-male boards used to examine problems only after they arose, said Loop, but boards with more women try to monitor a company’s current performance more closely.

“We noticed gender gap differences between what female directors are focused on, versus what male directors think are important," said Loop. "The things we highlighted were around culture and talent management.”

In addition, women on boards are less likely to sweep difficult situations under the rug, said Maria Vullo, the former superintendent of New York’s Department of Financial Services, which oversees corporate governance at major Wall Street banks. Once bad apples have been forced out, "a woman might ask, ‘How are we going to prevent it from happening again?’” Vullo said.

However, while PwC’s survey showed there is broad support for inclusiveness at the board level, men and women are not equally enthusiastic about pursuing it. According to PwC, 58 percent of male directors surveyed think efforts are driven by political correctness, compared to 27 percent of female directors. Around 54 percent of male directors think shareholders are too preoccupied with the subject, compared to just 20 percent of female directors.