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Many U.S. boards lack vision, just tick boxes in search for women directors

BAE Systems Inc CEO Linda Hudson smiles during the Reuters Aerospace and Defense Summit in Washington, September 3, 2013. REUTERS/Jason Reed

By Nadia Damouni

NEW YORK (Reuters) - Linda Hudson, former CEO of the U.S. arm of British defense company BAE Systems Plc, is among the women that boards call on when they are looking for a female director. In the past two years, she has been approached about 18 times, but the retired executive turns down most of the approaches, she said.

The demand for the 64-year-old Hudson underscores an issue women directors are noticing: companies may be talking about how they want to have more diverse boards but a lot aren't putting in the effort needed to make it happen. This is reflected in the many requests women already on boards get to join more, while those who are qualified but haven’t yet tasted life as a director get none.

"You often don't get the enlightened thinking of reaching beyond the obvious candidates," said Hudson, who sits on the boards of Bank of America Corp and utility Southern Co., and is thinking of joining a third.

The narrowness of the net being thrown may be reflected in the recruitment numbers. Of the 478 new directors appointed to Fortune 500 boards in 2014, only 27 percent were women, according to research firm BoardEx. While those numbers are improving – in 2010 the number was 20 percent – they only represent gradual progress toward parity with men.  

Boards that are slow in adding women may dent shareholders' returns. A 2014 Thomson Reuters study of 1,843 public companies around the world estimated that an index of companies with women directors on average slightly outperformed an index of those with no women directors between 2009-2013, with the difference only becoming clear in the last two of those years.

One reason boards may be slow to add women is that they often restrict their focus to current and former CEOs of big companies. In the Fortune 500, only 25 companies have women CEOs, and given the impenetrable nature of glass ceilings in previous eras there aren’t so many former women CEOs to turn to either.

“The women who fit that criteria are essentially tapped out already,” said Jane Stevenson, vice chairman of board and CEO services at executive search firm Korn Ferry.

At least some boards now are willing to look at women who ran business units at major companies, said Eugenia Ulasewicz, who previously ran the Americas business for British luxury fashion house Burberry Group Plc and now sits on three corporate boards. "The pool is opening up," she said.

 Examples of female non-CEO executives becoming directors in the past few months include Linda Sanford, who led the internal transformation strategy for IBM Canada Limited and IBM United Kingdon Limited and joined the board of power utility Consolidated Edison, and Myrna Soto, chief infrastructure and information security officer for cable and broadcasting company Comcast, who joined the board of utility CMS Energy.

Still, though, only 18 percent of all S&P 500 company directors are women right now, according to PricewaterhouseCoopers

And in interviews with more than a dozen female directors for major U.S. companies, a majority agreed progress in moving toward gender parity is painfully slow. Apart from the obsession with recruiting CEOs, they cited slow turnover due to a lack of term limits and increases in director retirement ages at many companies. According to executive search firm Spencer Stuart, 45 percent of S&P 500 company boards had an average age of 64 or older in 2014, up from 16 percent in 2004, while 30 percent of companies who specify a retirement age for directors set it at 75 or older, against only 5 percent a decade earlier.

Older directors “want to hang on, they want to stay in the game," one woman director said.

Women directors who have not had CEO experience said getting noticed wasn’t easy. Carol Tome, chief financial officer at home improvement retailer Home Depot, who is also on the board of United Parcel Service Inc said she worked extensively for nonprofits and that helped her meet CEOs and others who eventually invited her to join boards.



Several directors who spoke to Reuters said they are careful to only join boards of companies that seem to have a commitment to achieving diversity.

“You can pretty much tell when a board just wants to tick off a quota, and I think a lot of  women are not interested in being the female token,” said Mary Cranston, who is the chair emeritus of law firm Pillsbury Winthrop Shaw Pittman LLP, and is on the boards of Visa Inc and telecom equipment company Juniper Networks. 

Some female directors said they would turn down an invitation to join a board if they were the first and only female director. Hudson said she declined to join one board that seemed like it was “locked into the dark past.” She declined to name the company.

Others told Reuters they would be open to the idea of joining an all-male board, but only after extensive due diligence on the company’s culture, management, performance and the other directors.

Women who are willing to be pioneers say the experience can be satisfying. A female director, who declined to be identified because of the sensitivity of the discussions, said the CEO of one company told her that there was a difference in the board room after she joined. He told her that "if you were not in the room, it would be like a frat party,” she said.

One opportunity for adding women to boards may come from an unlikely source: more companies are looking to add directors with expertise in technology, including tackling cybercrime and Internet sales.

According to a survey by Korn Ferry for Reuters, 28 percent of the women appointed to Fortune 500 boards for the 12 months ending February 2015 had technology experience, including digital, big data and cybersecurity skills. The equivalent figure for men with technology expertise in that time was only 6 percent.

And that is despite  the tech sector’s reputation for being unfriendly to women, which suggests the pool of potential female directors with a tech background may not be deep but it is big enough to be a viable source, recruiters said. Some companies who have added women directors with a tech background in the past two years are McDonald’s Corp, Hertz Global Holdings Inc, Nike Inc, Whirlpool Corp, and Mattel Inc . 

(Reporting by Nadia Damouni; Editing by Dan Wilchins and Martin Howell)