How more women can get on bank boards
Diversity in the boardroom is an ongoing topic for everybody these days — from large Fortune 500 companies to the smaller publicly traded tech startups, including inside the banking sector. But while big U.S. banks have more female directors than some other industries, growth has slowed.
According to a recent survey of 21 of the largest banking and capital markets companies, women only made up 26% of all board directors; which has remained unchanged since 2016. This number, compared with a 21% makeup in the S&P 500, is somewhat better. However, if we look only at 2017, the banking and capital markets industry is lagging behind, with only 13% of new board directors being women, while during the same year, 32% of new board directors at S&P 500 companies were women.
Women are good for business, especially in the financial industry, but there is definitely more work to do in the movement toward diversity of thought in the boardroom, which, of course, includes gender diversity. Because women bring different knowledge, experiences and values to the boardroom table, their shared perspectives bring cognitive variety that creates space for debate and informed decision-making.
There are several important obstacles to consider for why women remain underrepresented in boardrooms at banks and in general.
One of the biggest is networking and “who you know.” When a high proportion of board members are men and a board seat opens up, it can be easy for the “old boys' network” to kick into high gear. This can be intimidating for women to feel comfortable networking within that group of board connections when they feel like the outsider.
Another factor holding women back is the lack of women in the C-suite. Women remain severely underrepresented at banks at this level, with women CEOs representing just 4% of the industry, according to an analysis by S&P Global. This spreads to women in the banking boardroom as well, because when the search is underway for a new board member with banking expertise, it frequently begins with those CEOs and others at the highest level. Without more women in those positions, the selection pool is significantly limited.
Yet, even though there are systemic issues surrounding getting more women in the banking boardroom, there are steps that women can take to boost their chances. Being able to communicate the strengths and qualifications that make them great board candidates is important. Especially for women with several years of experience in the C-suite or other prominent executive positions, they need to recognize what that is worth to a company. This is their value-add. Women too often discount themselves for positions and promotions because they believe they are unqualified. This may just be because they feel the need to “check all of the boxes” of what someone is looking for instead of just going for it, an issue men certainly have less often.
They also need to be ready to network at every opportunity and know whom in their existing network to connect with, what to say to them and how to maintain that relationship. It is important to have an elevator pitch prepared so that women can quickly verbalize desire to be on a board and what makes her stand out as a candidate when opportunities present themselves. Staying in touch with mentors, former colleagues and other people with connections can reap significant networking benefits.
See the recent Most Powerful Women rankings:
When women take these steps to empower themselves and take charge of their space in the banking boardroom, they also combat some of the systemic issues mentioned earlier. Articulating their value-add to key stakeholders can help to bring the diversity of thought onto boards. Extending and calling on women’s networks to communicate board openings and offer references works to deconstruct the old boys' club. Both of these can help fix the slow progress being made on adding more women to bank boards. Additionally, thinking companywide, it is truly about a culture shift that values the presence and voice on women in the boardroom.
Why does this issue matter? Gender diversity in the boardroom gives companies more of a competitive edge in the market. Companies with more women in leadership consistently outperform those with fewer women. Ultimately, those with a better representation by women on the board of directors tend to see better financial returns. Research has shown that among Fortune 500 companies, those with the most women on their boards achieved better financial performance overall than companies with fewer women. With more women, corporate boards have access to new expertise, larger external networks to meet the needs of diverse stakeholders, and can signal innovation and competitiveness to the market. In addition to potential loss of financial gain, without women or without enough women on their boards, financial institutions are at risk for misunderstanding or even misrepresenting a key demographic — and can experience issues growing their workforce to meet industry trends demands, not to mention being able to understand and respond to all customer needs.
Getting a more gender-balanced boardroom will not be easy. There is a difference between meeting a quota and trying to achieve diversity. The positive impacts on performance measures and revenue for banking institutions start to come when there are enough women represented on the board. There is power in numbers. It is pretty common for one woman at the table to be the token, where two is a presence and three is a voice.
With a voice, women are often more comfortable speaking up and asking questions — or letting the men at the table know that the man sitting next to her just repeated what she said and he was the one that received credit for it.
This BankThink post is part of a series that also features Cate Luzio, a former HSBC executive; LeeAnne Linderman, a retired Zions Bancorp. executive; and Bob Jones, the chief executive of Old National Bank.