Ten years ago, Patricia Lenkov left the world of executive recruiting at high-profile firms such as Spencer Stuart and Heidrick & Struggles, where she had worked for more than a decade, to go out on her own, starting up a firm she calls Agility Executive Search.
The year 2008 was a difficult time for such a move, Lenkov admits, “but it was a leap of faith, and I have not looked back.”
“I wanted to be more nimble, agile, hence the name,” she says. “I founded my firm to take all of the best practices that I learned from the best people in the business.”
Agility works with midcap public and private companies. It is also sought out by private equity firms looking for either advisors for their own funds or executives and board members for their portfolio companies, as well as activist investors looking for talented directors for their campaigns to unseat current board members.
Lenkov, who sits on the New York Steering Committee of 2020 Women on Boards, has become a thought leader on board recruiting, corporate governance, composition and succession at a time when there is increasing pressure to bring women onto boards by everyone from pension funds like Calpers to heavy hitters like Blackrock CEO Larry Fink. Some countries even have mandated quotas. Worth recently talked to Lenkov about why women make corporate boards function better—and what efforts are underway to ensure more diversity in the boardroom.
Q: Why is it important to have more women on corporate boards?
A: Almost a decade ago, Catalyst [a nonprofit organization that promotes inclusive workplaces for women] published a report that showed that when boards have two or three women, there is an increase in return on assets, return on investment, return on equity—all kinds of returns. That research was groundbreaking, and other studies have replicated those results.
Why do you think women on boards have that effect?
Diversity of thought is very important. When you study decision theory and decision making, groups that are made up of diverse people make better decisions. They take longer to deliberate, but when the decision is made, it’s a better one. Having a bunch of people in the room who all think the same doesn’t allow you to examine problems, and that’s effectively what boards do all day.
And this is a problem most boards face?
Historically, boards have been part of the “bro culture”—we’re all friends of the same age and we all agree with each other, and nobody really tells the emperor he has no clothes.
What else makes women good board members?
Look at a consumer products company that sells to women, and there’s no women on the board. A good example was an activist investor situation with Destination Maternity recently. If you look at the board before the activist engagement, it was one woman and eight men. It’s a maternity store. Do they, what, put on like a fake belly and try on the clothes? How could they possibly truly understand the consumer without having women in the room?
That sounds so clear.
It’s also an issue with employees. It’s really important to look up at the top of the organization and see yourself represented there because it’s motivating that you can reach the top, but also, you think maybe they understand you better.
Institutional Shareholders’ Service recently disclosed that as of June 30, 16 percent of Russell 3000 companies in the U.S. had no female board directors. What does that tell you?
It’s shocking that there should still be companies that don’t have women on their board, and how many have one woman? We consider that a token. That’s like a compliance exercise. It’s like, “We don’t really want to do this, but we have to so you’ll leave us alone.”
The best practices in any business situation are always adopted first by the Fortune 500. Only 22.6 percent of board seats in the Fortune 500 are held by women.
“Nobody’s suggesting that we put a nonqualified person on the board. The same qualifications that you could look for in a man, we can find in a woman.”
How does that change?
Nobody’s suggesting that we put a nonqualified person on the board. The same qualifications that you could look for in a man, we can find in a woman. But people often use that as an excuse.
Why do you think some are so resistant to putting women on boards?
Look, a board seat is a good gig—unless a company hits an iceberg. Public company board directors on average earn $290,000 for eight meetings a year for an average of 250 hours of work. It’s very desirable. People don’t want to give up their board seats.
Also, people like to be with people who look like them, think like them, who are predictable. When you start putting in these wildcards, it upsets the applecart. Nobody knows if this person’s going to question things that everybody has taken for granted for so long.
You work with shareholder activists. Have activists, who are almost all men, come to see this as a strategy that can help them win over institutional investors? What role have they played in this?
Not all activists are created equal. I don’t think Carl Icahn has ever put a woman up for one of his slates. The ones doing it are thinking about governance in a good way. They’re trying to dislodge some directors, so their candidates have to be even better on all levels than those in the boardroom now. It has to be a pretty tight, high-profile group.
How has the #MeToo movement affected the move to put women on corporate boards?
Boards are scared, and they are moving very quickly and changing out executives and CEOs who have even the slightest sense of something that’s off. I don’t think that would have happened five years ago.
Do you think that is accelerating the move toward women on boards, or if there were women on boards, would this have happened sooner?
The fact that more women are in the boardroom is allowing people to come forward and say, “Oh, we have somebody at the top of the house who looks like me and who might understand me in a way that a man unfortunately never could.” That said, most women directors don’t want to be viewed as just a woman. They want to be just seen as a director. They’re sensitive to being a social justice warrior in the boardroom.
Is there any kind of a backlash because of the #MeToo movement?
Most women directors that I’ve met are astute enough to manage themselves. They’re going to have the wherewithal to be able to insert their views. You need to have the emotional intelligence and the savvy to be able to ask the tough questions and change the conversation without people being offended by it.
What other initiatives are going on to ensure more women on boards?
Norway was the first country to pass a quota that 30 percent of board seats must be women. Companies had to comply or be delisted, so they put all these women on the boards, even if they were not completely qualified, and called them the “golden skirts.” They took a handful of women and put them on board after board. It actually is an example that didn’t go well, because they chose people who weren’t qualified, and it kind of backfired.
That’s unfortunate. What other countries passed quotas?
Italy, France, Germany. Even the United States has some soft quotas. People don’t know that. California Resolution 62 says that all companies headquartered in California must have X number of women on their boards. Something similar was passed in Massachusetts and Illinois, and now California is examining having an actual quota.
What’s fueling that trend?
The fact that there’s discussion of actual quotas in the U.S. is shocking, because the thinking amongst practitioners and academics and businesspeople and directors is, we as a country don’t want quotas, we don’t need them, we’re going to do it on our own. We know what to do, and it’s not the way America works. But people are starting to feel like, hey, we’ve been talking about this for a long time now, and we’ve been giving companies a break, and doing letter writing and being nice and playing nice, but it’s not working.
What is the role of institutional investors like Calpers? These represent public employees, which means representing a lot of women. Are they pushing companies that they invest in to have more diversity and have more women on their boards?
Calpers and Calstrs have been talking about this for a very long time. Scott Stringer, the New York City comptroller, has something called the Board Accountability Project, where they have been advocating and pressuring companies to improve diversity.
Are these initiatives making a difference?
Blackstone CEO Larry Fink wrote a famous letter this year, in which he said, “We’re not investing in any companies that don’t have two women on their board.” Since Blackrock is invested in every company the world, it’s a big deal. It’s kind of like the light has been turned on, and companies are on notice. Whether they like it or not, they have to do something about it.