Though more women are being invited to become directors, they are still under-represented on boards. This leading governance author and academic discusses why this is so and suggests a series of steps that would-be women directors can take to enhance their chances of being asked to sit on boards.

As an academic in the field of governance, I am only too aware that women are under-represented on most boards of directors. In my research, I have attempted to determine why this is the case. Using the example of the Province of Quebec, I describe the steps that a government can take to ensure that more women are chosen to sit on boards. I have also developed a series of steps that women can take to enhance their chances of being identified as potential directors and ultimately, of being selected to sit on boards. I briefly describe these steps and some of my research in this article.

1. The Competency Matrix

Selected excerpts from a Matrix

© Richard Leblanc

In Canada, unlike in the United States, boards of public companies have been required to recruit and assess individual directors on the basis of the competencies and skills each one is expected to bring to the boardroom, or to advise shareholders why these activities do not occur (e.g., why a certain director was chosen even though he or she did not have the required competencies or skills). Section 3.12 of the Canadian Securities Administrators’ National Policy 58-201 Corporate Governance Guidelines calls for the use/application of a competency “matrix,” whereby the needed board competencies and skills are listed along one axis and individual directors and the competencies and skills each possesses are listed along the other. The competency ‘gap’ informs the selection of incoming directors.

So the real question is, “Is the matrix working, and more particularly, for women?” The matrix itself has problems, particularly for women. In some of the interviews I have conducted in my research, I canvassed the views of three senior Canadian women directors. The women’s identities are confidential, but their remarks are below:

“I think the reform must start prior to the recruitment process, and go back to the competency matrix itself… Some essentially require C-suite international experience to make it to the matrix. There are very few women with that level of experience and thus a matrix with that type of qualification will inherently exclude women from the board. … [A] board composed mainly of retired C-suite executives looks at things through a very narrow telescope. So I believe the place to start is understanding – and requiring in the matrix – that some board positions should in fact be occupied by a non-C-suite person. … One of the problematic results of some matrix designs is that once you have one woman on the board you get a “check” in the diversity box, and the rest of the board can be retired male C-suite executives. I believe the research, and certainly my own board experience, indicates that you need more than two women on the board to get a critical mass and change board dynamics.”

“If the matrix is sufficiently open to women, then one looks to the recruitment process. Many boards still operate on the principle that if you come across a good person you grab that individual. Recruitment is limited to circumstances when no-one can think off-hand of a good person with somewhat relevant C-suite experience! The old boys tend to know other old boys. In fairness to the recruiters I have dealt with recently, at least some feel they have failed in their job if they don’t present some credible female candidates on a search. Which again is why I go back to the criteria that the director must meet in the first place. The criteria are established by the board. And the board hires the recruiter.”

“The problem with the matrix is that people can put anything they want, and obviously they do if diversity appears as a competency on a matrix.”

“Women often do end up in the diversity category which leaves the impression they might not have made it otherwise.”

This is certainly not to say that the matrix is not working. In the words of two senior Canadian board chairs:

Our Competency Matrix tracks competencies (defined as a combination of skills and experience) across 5 key categories: Market Knowledge (Geography and Industry), Board Experience, Designated Group (i.e., diversity), Enterprise Leadership and Functional Capabilities … and 45 sub-categories. The board members self-assess themselves on a 3 point scale each year (i.e., “no competency”, “some competency” or “high competency”) for each sub-category. These results are summarized and a gap analysis is done.

Another chair writes:

The “skills” matrix in my opinion has been the BEST tool for helping our Governance and Nominating Committee seek out and screen new Board members. Quite simply the process starts with an understanding of the business the company is in and outlining the top eight to ten “skill and knowledge sets” that would be desirable to have on the Board to provide the required oversight that is needed.

Strengthening the Director Competency Matrix

Given the above data, we must ask what reform is needed in order to strengthen the matrix. In short, we need three things: a better design of the matrix; validation of the matrix and disclosure of the matrix, e.g., the competencies and skills used; and the number of directors possessing skilled or expert application in each competency or skill. Matrices are fuzzy, and to be effective they should be more objective, much like financial statements and pay-for- performance documents used by other committees. One difficulty, however, is that soft skills are hard to define and measure, so people shy away from evaluating them, leaving the matrix subject to gaming and possibly, not being used at all.

Given the ambiguity about the matrix, it is entirely reasonable to ask if women are critiquing themselves more harshly because the matrix competencies and scales are ill-defined. Some anecdotal evidence suggests this may be the case, namely that women are being overly critical.

Women’s tendency to be overly critical may be eliminated by incorporating a rich, still-developing body of academic and practitioner literature on director competencies. Board nominating committees should apply the matrix to the selection of directors with the same rigor that they bring to the audit and compensation committees, i.e., a formal, rigorous, transparent director selection procedure, with a competency gap analysis to drive the selection of incoming director. Search firms, when validating director competencies and other attributes, should also provide a heightened level of assurance provided by auditors and compensation consultants. The difficulty here is that service firms may not wish to assess director competencies for risk of offending individuals (and clients). The task, therefore, rests squarely with nominating committees, as it should.

Is it possible that women are marginalized by certain competencies within the matrix? This is more unclear. For example, just what constitutes a “competency” needs to be made clearer. A competency is a cluster of related knowledge and skills that correlate with job performance, can be measured against well-established standards, and can be implemented via training and development (Parry, 1998). The fact that a director may be significantly experienced (e.g., a CEO) does not necessarily mean he or she possesses certain specific competencies. As one director recently remarked, “I believe that our analysis focuses too much on experience and not enough on the actual skills and competencies that are brought to the table. It may be said that experience and background are a short-cut to determination of skill, but that may not always be the case.” Perhaps the concept of “leadership” needs to be unpacked at the board level, without jettisoning the strong preference for CEO experience, so that leadership in other contexts is recognized, e.g., government, professional service, community, direct reports to the CEO, etc., so women’s contributions are recognized and valued appropriately.

2. The Quebec example: Gender parity in state-owned enterprises (SOE)

Quebec has essentially said – “Yes” to having more women on boards and it has mandated that the skills matrix be applied to the selection of directors in SOEs. In addition, it has mandated the use of positive discrimination to achieve gender parity (and cultural) to get women past the goal line and onto boards in much greater numbers. These efforts have been quite successful. State-owned-enterprise boards in Quebec were composed of 28 percent women when the policy was tabled (April 2006). By September 2008, that number had risen to 42 percent women, and the province is on target to have 50 percent women on Quebec crown boards by December 14, 2011. Quebec universities are now included as beneficiaries of the Quebec government’s gender parity mandate. It is interesting to note that the figures for “cultural identity” on Quebec state-owned enterprise boards had risen from 13.3 percent to 16.2 percent as of September 2008.

3. More women on boards: A Top 10 To-Do List

Based on my research and the literature, I would like to suggest ten tactics that women who wish to sit on boards can use to enhance their chances of being identified as candidates and of being selected to sit on boards.

  1. Network strategically, collectively, outside your place of employment, and target men who sit on multiple boards. Use iconic, well-known females and male sponsors who can influence male change agents. Target courageous nominating committee chairs and senior male directors who can say they know you, and better yet, have worked with you.

  2. Manage your personal brand and maintain a fluid portfolio of roles and competencies boards want. Don’t get pigeonholed into your functional area, job or even company. Lawyers, accountants and consultants are issue-based and advisory, and not seen as having a broad perspective. Boards can always hire professionals rather than give them a board seat.

    The competencies that will be important over the next three to five years are risk management, executive compensation and sustainability planning. These are all learnable competencies. Just because you are a CEO does not mean you possess these competencies. Just because you are not doesn’t mean you don’t.

  3. Plan your career trajectory to allow you to acquire broad business experience for as long as you can, as this is the knowledge base and perspective that boards overseeing large complex businesses want.

  4. Lobby your employer for professional development training to become an external director, despite the twenty-five days a year it will cost. If your firm has a policy of not allowing employees to hold external directorships, inquire and see if there are exceptions to the policy.

  5. When you are being recruited, ask to see the competency matrix and how and where you fit in. You do not want to be considered a candidate only on the basis of diversity when you clearly have much more to offer a board than your ethnicity or gender and can make contributions in other aspects. If the company is doing its homework, it should have a matrix.

  6. “Board up.” Your first board will establish your reputation. Choose your first board wisely (small companies are higher risk). Consider not-for-profit, hospitals and crowns. When it comes time for your second board, calls will be made to your colleagues and chair to see if you are an effective director.

  7. Behaviour matters. Find a woman or a man on the board to critique your behaviour, including your tone, choice of words and frequency, especially for your first few boards. Role model certain directors on the board with similar techniques and personalities.

  8. Once you are on your first board, put in the time to master the business model. You need the respect of management and the board to operate effectively. Management will critique you behind the scenes because you are young and lack their experience. Don’t default to process or data to compensate for your lack of experience. Understand the transactions that underscore management judgment and estimates.

  9. Pick three to four key competencies you like and learn more than management. Sculpt your orientation, keep current, get educated and don’t be afraid to go outside Canada, where there are opportunities to learn and acquire new knowledge. Management is largely restricted to the firm for developing their knowledge. You are not.

  10. Above all, be yourself. Position yourself where your strengths can be appreciated, and make sure that you like the company, its ethics, products, management team, and that you can make a sustained, meaningful and enjoyable contribution.