Diversity on Boards Smart Business Lisa Levey Senior

Diversity on Boards: Smart Business Lisa Levey Senior Director, Advisory Services September 22, 2005

Agenda n About Catalyst n Business Case for Diversity n Women In Leadership n Board Placement n What Women Can Do n What Leaders Can Do © Catalyst

Catalyst Vision A world that supports and encourages every woman in her career aspirations and places no limits on where her skills and energy can take her © Catalyst

About Catalyst n Advancing women in business since 1963 – – © Catalyst Research Advisory Services Membership Awards

About Catalyst – Sample of Members Alcoa, Inc. Alcan Inc. American Express Company Bell Canada Enterprises Best Buy Co. , Inc. Booz Allen Hamilton, Inc. Cisco Systems Con. Agra Foods, Inc. Dell Inc. Deloitte & Touche Deutsche Bank Fannie Mae General Electric General Motors Harley Davidson IBM Corporation Johnson & Johnson J. P. Morgan Chase & Co. Kraft Foods Inc. Limited Brands, Inc. © Catalyst Marriott International Mc. Kinsey & Co. Microsoft Corporation Motorola Nextel Communications, Inc. Nordstrom, Inc. Pepsi. Co, Inc. Pfizer Inc. Raytheon Company Scotiabank Sempra Energy Shell Oil The Goldman Sachs Group, Inc. The Home Depot The Procter and Gamble Company TIAA-CREF Time Warner Trans. Canada Pipelines Limited Unilever Xerox Corporation

“Business Case” for Diversity According to 107 top U. S. companies and firms: n Competitive advantage (89%) n Improve retention (59%) n Improve marketing/sales results (46%) n Improve recruitment (46%) n Enhance creativity and innovation (41%) n Respond to legal requirements (7%) © Catalyst

“The Bottom Line” § Fortune 500 companies between 1996 and 2000 § Financial data – ROE and TRS – from Compustat (Standard & Poor’s) § Catalyst’s Census of Corporate Officers and Top Earners § Included companies that had 4 out of 5 years of data © Catalyst

Gender Diversity and The Bottom Line Average ROE Average TRS 35% or 4. 6 percentage points 34% or 32. 4 Percentage points In terms of both ROE and TRS, on average, top-quartile companies financially outperformed bottom-quartile companies © Catalyst Source: Catalyst, The Bottom Line: Connecting Corporate Performance and Gender Diversity, 2004

Building The Business Case Elements of the Business Case How can we improve bottom-line results? Increase Revenues Reduce Costs Ø Attracting new customers; finding new markets Ø Building customer loyalty; retaining existing business Ø Keeping your growth strategy from running out of fuel Ø Eliminating differential turnover across demographic groups Get the most from your people Increase Productivity © Catalyst Ø Tapping into top talent Ø Motivating all employees to do their personal best Ø Maximize the value of diverse teams – innovation, creativity, and quality Source: 2002 Creating a Business Case for Diversity, Part of the Catalyst Making Change Series

Catalyst Pyramid U. S. © Catalyst Canada

Catalyst Census of Women Board Directors Percentage of board seats held by women: U. S. © Catalyst Canada Source: Catalyst Census of Women Board Directors

Percent of Board Seats Held by Women in top 500 Companies U. S. Canada © Catalyst *Source: 2003 Catalyst Census of Women Board Directors

Number of U. S. Companies with Women Directors, 1995 -2003 Zero Women One Woman Two or more Women © Catalyst *Source: 2003 Catalyst Census of Women Board Directors

What’s the Problem? n Not a pipeline issue! n Women face unique barriers – Lack of access to informal networks – Lack of mentoring – Stereotypes about capabilities and preferences – Work-life challenges n The good news – CEOs increasingly see diversity as their responsibility to drive change © Catalyst

The Changing Landscape What Some Believe What Others Realize n CEO essential n Enough existing CEO n Not enough women at high enough level n No way to find them n A woman would be too different n One is enough! © Catalyst representation n Male CEOs need to mind own company n Add other qualifications to talent base n Reflect stakeholders

Impact of Sarbanes-Oxley n Nominating committees become the n n © Catalyst norm Fewer sitting CEOs available Changing profile of the ideal candidate Board independence and board diversity go hand-in-hand Look beyond the “usual suspects”

The Process - How It Happens Referrals, referrals!! n Exposure to qualified women (and men!) n CEOs or nominating committee n Search firms n Alliance for Board Diversity © Catalyst

Desirable Profile(s) For F 1000 n Line management positions with profit and loss responsibility n Financial expertise; other deep functional expertise; relevant industry-specific knowledge n Powerful connections n International experience a plus, but rarely the only requirement n “Soft characteristics” equally important © Catalyst

What Can Women Do? n Have a game plan n Obtain leadership experience n Get line/operating experience n Be well-grounded in finance/business n Be visible – seek high visibility assignments n Ask for what you want © Catalyst

Why Bother? n Contribute at highest decision-making level n Influence and change the world n Broaden general business knowledge n Develop new skills/areas of expertise to apply to own career; expand professional network n Provides prestige and remuneration n Act as role models and beacons of hope for other women © Catalyst

What Can Business Leaders Do? n Understand your role – Require a diverse slate – Be willing to take some risks – Be a voice of dissent – Assume women want to serve on boards – Refer women leaders that you know – Be vocal about the value of diversity in business © Catalyst

Conclusions n Diversity is a business imperative n Progress has been incremental but change is possible n Women face unique barriers that are not obvious to their male counterparts n The landscape for diversity in the boardroom is changing n Women and business leaders are both part of the solution © Catalyst