The pace at which women are invited into the city's boardrooms and executive suites remains sluggish at best. Until that changes, corporate Chicago is denying itself the talent pool it needs to compete effectively, role models who can lure and retain the best employees and the informed judgment that comes only from the airing of diverse perspectives.
My empirical research, conducted over nine years of bull and bear markets, strongly suggests that companies that groom women leaders are better governed and reward shareholders with better financial returns.
Yet, in 2006, Chicago's 50 biggest companies actually saw a decline in the number of women directors and top executives, according to an annual census by Chicago Network, an organization of professional women. In the past year, the number of women directors fell to 13.8%, and women execs to 14.6%, each a drop of about 1%. Thirty-seven of Chicago's 50 largest corporations had no women among their highest earners, up from 35 a year earlier.
Chicago is not unique. Catalyst, a women's advocacy group that tracks women executives in the Fortune 500, recently reported that most large U.S. corporations have made little progress in advancing women to leadership positions over the last 10 years. Yet, paradoxically, global executive search firm Spencer Stuart surveyed S&P 500 companies late last year and concluded that interest in recruiting more women directors remains strong.
Enlightened corporate decisionmakers understand that gender diversity is good business: A 2004 Catalyst study of Fortune 500 companies found that those with the highest percentages of women officers yielded, on average, a 35.1% higher return on equity and a 34% higher total return to shareholders than those with the lowest percentages of women officers.
However, since 2002, the Sarbanes-Oxley Act has mandated board independence and oversight, requiring greater time commitments from directors and increasing the responsibility borne by the directors. This has led many CEOs to reduce the number of boards on which they serve and has implicitly encouraged companies to attract new board members among retired CEOs, who can more easily take on the time commitment but whose ranks are dominated by men.
Chicago's corporate leaders should insist that qualified women advance in their organizations. They should never settle for tokenism. They should evaluate transparently the performance and leadership potential of women employees and promote from within. They should cast a wide net, recruiting talented women in other regions and industries, in the non-profit community and academia. And they should appoint women to audit, compensation and governance committees of the board. Demanding diverse slates and diverse outcomes will drive shareholder value.
This month's Lane Report is adapted from a guest editorial published in Crain's Chicago Business on February 5, 2007.
Marc J. Lane is the President of The Law Offices of Marc J. Lane, a Professional Corporation, and of its financial-services affiliates. He is a business and tax attorney, a Master Registered Financial Planner, and an Adjunct Professor of Law at Northwestern University School of Law.
The Lane Report is a publication of The Law Offices of Marc J. Lane, a Professional Corporation. We attempt to highlight and discuss areas of general interest that may result in planning opportunities. Nothing contained in The Lane Report should be construed as legal advice or a legal opinion. Consultation with a professional is recommended before implementing any of the ideas discussed herein. Copyright © 2007 by The Law Offices of Marc J. Lane, A Professional Corporation. Reproduction, in whole or in part, is forbidden without prior written permission.