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Improving gender diversity in the workplace

In this article:
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Jess Huang, McKinsey Partner and Phyllis Newhouse, Founder & CEO of Xtreme Solutions, Inc. and CEO of Athena Technology Acquisition Corp., joins Yahoo Finance Live to discuss gender diversity in corporate boards and in the workplace.

Video Transcript

[MUSIC PLAYING]

ALEXIS CHRISTOFOROUS: Welcome back. Many studies have shown that having women on company boards of directors is simply good for business. So why aren't we seeing more of them? When it comes to positions of leadership, women make up less than 21% of boards of S&P 500 companies and an even smaller 5% of the CEOs of Fortune 500 companies.

Joining me now to talk about it is Jess Huang, a partner at the consulting firm McKinsey, and Phyllis Newhouse, founder and CEO of Xtreme Solutions and CEO of Athena Technology Acquisition. Welcome to you both, and thanks so much for being here. Jess, I'm going to start with you. We talk about, there's a lot of room we still need to grow and to have more women be on company boards, but how far have we come? Can you paint that picture for us from, say, just a few years ago?

JESS HUANG: Yeah. Thanks so much for having me. So we have made a little bit of progress over the last few years, but it's really slight percentage points of progress. And the progress is really being driven certainly in states that have actually put down legislations that have required women to serve on boards, for example, California and a couple of fast follwer states such as Massachusetts. But even though we have been pushing for this over the past few years, we actually haven't seen significant change in terms of representation of women on boards.

ALEXIS CHRISTOFOROUS: And the numbers bear out that it is good business sense to do this, right? Companies with diverse management tend to do better financially 35% of the time. So Phyllis, what are the barriers right now do you feel to having women be a bigger presence on companies' boards and in their C suites?

PHYLLIS NEWHOUSE: Well, I'll just tell you, I have a cyber firm. And when you look at the number of women in cyber, which that's really a needed position and expertise that's needed on a lot of boards today. But when you look at the number of women that's in cyber that serve in leadership roles or that would have the board qualifications, there are very few. So I also think that when you look at, even with women of color, if we take that number alone, only 4.6% of seats are available. But then when you look at women of color make up 18% of the population, we're only holding 4.6% of those board seats that are in the Fortune 500. And so that number has to change. And I think some of the barriers are that the opportunities and looking at the the skill sets that are needed for the boards as well.

ALEXIS CHRISTOFOROUS: And what are some of those-- Phyllis, this one's for you. What are some of those skill sets that perhaps are unique to women?

PHYLLIS NEWHOUSE: Well, I look at the public boards that I'm serving on. One of the things when I look at the technology, for an example. We'll just use the technology as an example. When you look at some of those skill sets, it's helping companies look at how they will pivot during a time after the pandemic. If you've led a company before, a lot of these women CEOs in the private space that have tech companies, these are amazing opportunities for some of the companies when I look at the growth that a lot of the private companies to include myself that have had, we would have great skill sets as a founder, operator who led and scaled companies to a sizable company. I think that's a tremendous skill set that you could have on boards.

ALEXIS CHRISTOFOROUS: Jess, are there particular sectors that are ahead of the game, that are doing a little better when it comes to diversity and female representation on boards and in higher level executive positions?

JESS HUANG: Interestingly enough, we don't see a ton of variation across sectors. I think, as you might expect, where some industries have more leadership talent who are women at the top, it tends to be a little easier to recruit for board positions. So for example, if you look at retail. But that, honestly, is one of, I think, the biggest barriers to getting more women on boards, and that's the fact that people are often sourcing from the C-suite.

And we know from our research that only 22% of the C-suite is comprised of women. And so if the source for women on boards is going to be the C-suite, you're picking from a smaller population to start. And so to really move the needle on representation of boards, companies are going to have to start looking at different sources and potentially solving for functional areas of expertise and experience, for example, rather than just relying on the tried and true networking of C-suite sourcing as before.

ALEXIS CHRISTOFOROUS: That's really insightful and interesting. Do you find that women have a better chance of moving up the corporate ladder in house in the company they're currently in? Or do they have a better shot of coming in as an outsider to some of these firms?

JESS HUANG: What we've actually seen in the last few years is that companies have made quite a bit more progress at the top in representation of women than earlier on in the corporate ladder. We've seen 22% improvement in the last five years at the C-suite. And that's largely driven by this focus at the top on breaking the glass ceiling. And a lot of that is things like requiring diverse slates when you're thinking about external hiring, to your point.

But even when you think about it that way, if you aren't able to move more women through the pipeline, you're going to have a limited pool of women to select for. So companies that are really serious about moving more women to the top are going to have to be thinking about things like the broken rung and actually focusing on promotion of women from the early entry level of the pipeline to the first step up into manager.

ALEXIS CHRISTOFOROUS: I'm sure you both know Berkshire Hathaway held its annual shareholder meeting this weekend. We streamed it here on Yahoo Finance. And Warren Buffett addressed his shareholders. And one of the things that happened this week, and I'd like your your take on it if we have time.

Phyllis, I'm going to start with you. There was a proposal that would require Berkshire Hathaway to disclose or show more transparency when it comes to diversity in the workforce and promoting diversity within the company and also addressing climate change. But that's for another discussion. And that proposal was actually rejected. What's your take on that? And does that put these efforts behind a few steps?

PHYLLIS NEWHOUSE: Yeah. In my opinion, it does. I think if you don't have that level of accountability, we will still be behind the power curve. And let me just say this. I truly believe that women are the best advocate for changing this, even if it is not OK to be the only woman on the board and you don't become a mouthpiece for change in that. And I think that rejection sent a loud message, in my opinion. But I do think that we can become better advocates for one another to increase the number of people of color on boards and to increase the number of women that are serving on boards.

ALEXIS CHRISTOFOROUS: Jess, I'd love for you to just weigh in on that rejection of that proposal at the Berkshire Hathaway meeting over the weekend for more transparency when it comes to promoting diversity and diversity in the workplace.

JESS HUANG: Overall in our research what we found as we've looked at companies that have made progress in diversity, equity, and inclusion versus companies who have not, there's been one thing that remains consistent. And that's companies that actually measure and track their progress are the ones that make progress. I think it's the old adage of, what gets measured gets done. And so as we think about things like diversity, equity, and inclusion more broadly and as we think about the progress of representation of women on boards, I do think that measuring the progress and being clear about where we are and where we are not making progress is extremely helpful.

ALEXIS CHRISTOFOROUS: All right. Jess Huang, partner at the consulting firm McKinsey, and Phyllis Newhouse, founder and CEO of Xtreme Solutions. Thanks so much for making time for us today.