Corporate Governance

A "Prettier" Board and Gender Diversity: An Opportunity for a US Competitive Advantage

By J Robert Brown Jr.

We are writing about the litigation brought by the Business Roundtable and Chamber of Commerce designed to challenge the SEC's shareholder access rule.

One likely consequence of shareholder access will be more diversity on the board.  This will occur in part because access nominees will likely be chosen from a broader pool of candidates than is used by a typical board.  With boards often focusing on existing and former CEOs, the pool is by definition not very diverse.  Access nominees will not be so limited.  Moreover, boards will potentially select more diverse candidates as a way of avoiding an access challenge.  

It is our view that management of public companies will benefit from the more diverse views that will likley accompany diversity on the board.  In other words, it will improve rather than harm competitiveness.  

To the extent this is true, it provides an opportunity to create a competitive advantage in the global market place.  Diversity is anemic globally.  Moreover, as the WSJ recently reported, some companies overseas will be slow to diversify.  According to the article, the CEO of Deutsche Bank, Josef Ackermann, commented that the addition of women on his management board would make it "more colorful and prettier too." 

Of course, some countries, such as Norway, have legally mandated that the boards of public companies have at least 40% of each gender.  But the number of countries that have done so are few and their economies relatively small, all things considered.  This is an opportunity for US  companies and US governance to move ahead of foreign competitors, including companies such as Deutsche Bank. 

Full post as published by The Race to the Bottom on February 07, 2011 (boomark / email).