In figures, the progress of companies in terms of gender diversity is a failure
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When Anat Ashkenazi became CFO of Eli Lilly in 2021, she noticed a frustrating fact: she was the only female CFO in the biopharmaceutical sector.
Her path was relatively easy, she says, leaving Israel for the United States 21 years ago and coming from a noticeably different culture in which gender inequality was less of an issue. “I never thought about being the only woman in the room,” said CNBC CFO Council member Ashkenazi.
Although two other female CFOs have been appointed in the biopharmaceutical sector since Ashkenazi became CFO of Lilly – and there are a few examples of high-profile female CFOs to cite, including Alphabet’s Ruth Porat and Disney’s Christine McCarthy – the total number of female CFOs remains relatively low compared to the population and the data on diplomas.
The United States is doing better than some countries, with its 15% of female CFOs in large companies above the global average of 13%, according to Equileap data, but it is well below some close peers, like Canada, which is at 19%. .
“Everyone is down and the United States is not doing very well,” said Equileap co-founder and CEO Diana van Maasdijk.
Worldwide, of the 4,000 companies included in Equileap’s study, only 1% have a female CFO and a female CEO.
“The adage that you get lonely at the top…it becomes lonely at an even earlier leadership level, at the director or vice president level, and at the even lonelier CFO level,” Carolyn Childers said. , co-founder and CEO of Chief, a professional network focused on trying to get senior women in their careers to positions of ultimate power “and keep them there,” Childers said.
Equileap’s data matches that of Crist|Kolder Associates, the US research firm, which analyzes the composition of the C-suite in the S&P 500 and Fortune 1000, and reported that last year the US had just under 15% female CFOs.
While many headlines have cited the progress, Josh Crist, co-director of the research firm, which focuses on financial agents, takes another view. “That’s an extraordinarily low number,” he said. “Gender diversity is ahead of racial diversity in CFO and on, but not by much. It’s a numbers game and a population numbers game, and we’re talking about a huge gap .”
Ashkenazi focuses on the question of how to attract more women to the CFO position and, on a broader level, how to understand the journey of women in the corporate world. Lilly has conducted internal research in recent years to track women’s career progression and overlay it with other demographic factors, such as race and ethnicity, to better understand why women in the workplace may stagnate at certain levels. “We wanted to know why women weren’t moving forward, and the findings aren’t unique to Lilly,” she said. “But few companies devote a lot of time and resources to it,” she added.
She estimates that achieving gender equality in the C-suite could take 30 to 40 years.
It could take even longer, according to Equileap. Women have been coming out of universities with good degrees since the 1970s, at least as many degrees if not more than men, and so it has been a while since they could have been placed in these positions.
“CFOs are 15%, but CEOs are 6% in a country that has the strongest economy in the world with incredible universities and degrees. How is that possible?” says Van Maasdijk. “We think the right number is 40% to 60%. If you go beyond that, it’s no longer balanced, but 51% of the world’s population is female.”
At the current rate of progress, a gender equality goal that matches the population may not be achieved for another seven generations, according to Equileap. “It’s not just daughters or granddaughters,” Van Maasdijk said.
What to do ?
Changing the way the C suite performs searches is essential.
Crist says it starts with composing an interview list, in which various candidates always represent the candidates in the subset. Searches should be tilted so that 75% of the list is diverse rather than 25%. The latter is more common today – for example, four out of twelve candidates are diverse, rather than eight out of twelve.
And the four people invited to interviews are often the same people on a list who get pinged and have conversations with several other companies, according to Childers. “The same people are still chosen and we need to think more broadly about qualifications rather than a specific CFO in Company X,” she said.
What often happens, according to Crist, is that companies will say they want to be more diverse, but a “best fit” approach leads to many good candidates being overlooked.
CFO searches aren’t easy, according to Childers, and can be the most time-consuming within the C-suite, meaning an already lengthy process of finding the right person can become even longer when a priority is to ensure diversity for the role. . “They’re looking for exactly what makes sense and often not what the diversity shows you, because you have to stretch a bit,” she said.
Achieving 75% diverse candidates can mean no overlap in candidates’ industry and fewer years of experience overall. But councils are starting to realize that the “best” available may not be in their industry. “Boards are stuck in this ‘we tick the boxes’ mindset when recruiting and if we don’t tick the boxes, we fail to recruit,” Crist said.
The mindset must also evolve throughout the talent pool, well below the C-suite level.
The NFL’s recent decision – under fire and facing a lawsuit from several black coaches for hiring discrimination – to require every team to have a minority offensive assistant coach, is an example of the need for the intentionality in the design of talent pipelines. There is a greater likelihood that the next coach will be diverse based on the data showing the history of where the head coaches come from.
“You would think that a company with 100,000 employees would have someone they could train to eventually take on this role,” says Crist. “A lot of it is down to the companies themselves. With a finance function of 3,000 people for a Fortune 50 company, you would think there would be someone very capable and diverse there.”
According to Equileap, the target level for candidates interviewed for open positions should be 50/50 in an organization, forcing search teams out of the smaller circles of candidates they believe are the right interviews. If companies hit 50-50 in the recruiting pipeline, it will break that cycle.
And getting more women in CFO roles, in particular, will lead to greater board representation, Childers says, as boards seek CFOs to serve on audit committees. . “It opens up the next opportunity,” she says.
When all else fails – and the data shows that today this case can still be made – legislation is another option. Equileap data from the past five years shows a clear correlation between legislation and better representation. France requires 40% of board members to be women, and the country’s corporate sector has met the target.
Governments often don’t want to get involved in the corporate sector, and a growing body of research shows that recent corporate financial performance has been better with a better gender balance. Equileap’s work on the Russell 1000 from 2014 to present shows that companies with higher gender equality scores have outperformed those with lower scores.
France’s experiment with board legislation has been so successful that it now calls for the leadership suite to also be 30% women, rising to 40% within a few years.
“We can’t find the women is no excuse, it’s a question of where you look and how you look”, according to Van Maasdijk.
But the CEO of Equileap says that even with the data on financial performance and diversity, the truth today remains largely that “when the law requires, it happens, and when there is no law, it doesn’t happen”.
In 2018, California became the first US state to pass legislation mandating gender diversity on state-based company boards. This coincided with a period of increasing female representation on corporate boards. In 2020, the state went further, with a law requiring California-based publicly traded companies to have at least one board member from underrepresented races, ethnic groups, and the LGBTQ community. But a California court recently declared the 2020 law unconstitutional.
Los Angeles County Superior Court Judge Terry Green’s summary judgment against the state did not explain the court’s reasoning, although the judge previously described the law as “a bit arbitrary.”
The successful lawsuit by conservative-leaning legal group Judicial Watch argued the California law violated the state’s Constitutional Equal Protection Clause, while the state argued the measure was not discriminatory. California also noted that while businesses can be fined for failing to comply with the law, the state has taken no action against the companies, even though many businesses in the state have yet to take action. complied with the disclosure requirement of the law.
The 2018 coeducation law is facing a separate legal challenge brought by Judicial Watch. It also takes aim at a Nasdaq corporate diversity rule for companies listed on its exchange.
Childers says the legislation should be a last resort.
“I hope it won’t have to be legislated and I’m optimistic about what has happened in recent years,” she said. “We were in a world where the C-suite still needed to be told about the business case for diversity. Now they know the business case, but the action hasn’t started. Hopefully that it would start without the function of forcing legislation, but we have been supporters of legislation where action does not move fast enough.”