By the Numbers, Corporate Progress on Gender Diversity Is a Failure

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  • The latest data shows that about 15% of chief financial officer posts are held by women at large-cap companies in the U.S., which is progress, but falls far short of where it should be.
  • Women represent half of the population and have been earning advanced degrees in at least equal numbers to men for decades.
  • Experts say companies will need to rethink how they conduct executive searches to close the gender gap or the timeline to fix the imbalance will be measured in decades.

When Anat Ashkenazi became CFO of Eli Lilly in 2021, she noticed a data point that was frustrating: she was the only female CFO in the biopharma sector.

Her path had been relatively easy, she says, moving to the U.S. from Israel 21 years ago and coming from a substantially different culture in which gender inequality was less of an issue. "I was never thinking about being the only women in the room," said Ashkenazi, a CNBC CFO Council member.

Though two more female CFOs have been appointed within the biopharma sector since Ashkenazi became Lilly's CFO — and there are some very high-profile female CFO examples to cite, including Ruth Porat of Alphabet and Christine McCarthy of Disney — the overall numbers for female CFOs remain relatively low relative to the population and educational degree data. 

The U.S. is doing better than some countries, with its 15% of female CFOs at large companies above the global average of 13%, according to Equileap data, but it is well below some close peers, such as Canada, which is at 19%.

"Everyone is low and the U.S. doesn't do great," said Equileap co-founder and CEO Diana van Maasdijk.

Worldwide, across the 4,000 companies included in Equileap's research, only 1% have a female CFO and female CEO.

"The adage that it's lonely at top … it becomes lonely at an even earlier management level, director or v.p. level, and at the CFO level even lonelier," said Carolyn Childers, co-founder and CEO of Chief, a professional network focused on trying to get women senior in their careers into the ultimate positions of power "and keep them there," Childers said.

Equileap's data matches that of Crist|Kolder Associates, the U.S. search firm, which analyzes C-suite composition across the S&P 500 and Fortune 1000, and reported that as of last year, the U.S. was just under 15% female CFOs.

While many headlines have cited the progress, Josh Crist, co-managing partner of the search firm, who focuses on financial officers, takes another view. "That is a number that is extraordinarily low," he said. "Gender diversity is ahead of racial diversity in the CFO position and C-suite, but not by much. It's a numbers game, and a population numbers game, and we are talking about a massive gap."

Ashkenazi is focused on the issue of how to get more women into the CFO position, and at a broader level, how to understand the journey of women in the corporate world. Lilly conducted an internal study in recent years to track the career progress of women, and overlay it with other demographic factors, such as race and ethnicity, to get a better sense for why women in the world of work may stall at certain levels. "We wanted to know why women didn't advance, and the conclusions are not unique to Lilly," she said. "But not many companies are spending a lot of time and resources on it," she added.

She estimates getting to gender equality in the C-suite could take 30 years 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 an equal number of degrees if not more degrees than men, and so it has been quite some time they could have been placed into these positions.

"CFOs are 15%, but CEOs are 6% in a country that is the strongest economy in the world with amazing universities and degrees. How is that possible?" Van Maasdijk said. "We believe the right number is 40% to 60%. If you go beyond that then it is no longer balanced, but 51% of the population of the world is female."

At the current rates of progress, a gender equality target that matches the population may not be reached for another seven generations, according to Equileap. "That's not just daughters or granddaughters," Van Maasdijk said.

What's to be done?

Changing how the C-suite conducts searches is key. 

Crist says this starts with the composition of an interview slate, in which diverse candidates still represent the subset candidates. Searches need to be tilted to 75% of the slate being diverse rather than 25%. The latter is more common today – for example, four of twelve candidates being diverse, rather than eight out of twelve.

And the four who are invited for interviews are often the same few people on a list who get pinged and are having conversations with multiple other companies, according to Childers. "The same people are always getting picked and we need to think more broadly about the qualifications rather than a specific CFO at X company," she said. 

What often happens, according to Crist, is companies will say they want to be more diverse, but a "best candidate" approach leads to many good candidates being overlooked. 

CFO searches aren't easy, according to Childers, and can be the most time-intensive within the C-suite, and that means an already long process to find the right person can become even longer when a priority is ensuring diversity for the role. "They go after exactly what makes sense and often not what diversity shows you, because you have to stretch a little," she said.

Getting to 75% diverse candidates may mean there is no industry overlap in candidates, and less total years of experience. But boards are starting to realize the "best" available may not be in their industry. "Boards are stuck in this 'we check boxes during recruitment and if we don't check boxes we are not successful in recruiting' mindset," Crist said. 

The mindset needs to evolve throughout the talent pipeline as well, well below the C-suite level.

The NFL's recent decision – under fire and facing a lawsuit from several Black coaches over discrimination in hiring – to mandate that every team has a minority offensive assistant coach, is an example of how intentionality in designing talent pipelines is required. There is a greater likelihood of the next coach being diverse based on the data showing the history of where head coaches are sourced from. 

"You would think a company of 100,000 employees would have someone they could train to take on that roll eventually," Crist says. "A lot falls on the companies themselves. With a finance function 3,000 people for a Fortune 50 company, you would think there would be someone very skilled and diverse." 

According to Equileap, the target level for candidates being interviewed for open roles should be 50/50 across an organization, forcing search teams out of the smaller circles of candidates who they think are the right interviews. If companies reach 50-50 in the recruitment pipeline, it will break this cycle.

And getting more women into CFO roles, specifically, will lead to greater board representation, according to Childers, because boards are looking for CFOs to serve on audit committees. "It unlocks the next opportunity," she says.

When all else fails — and the data shows that today that case can still be made — legislation is another option. Equileap's data from the past five years shows a clear correlation between legislation and better representation. France has a requirement for 40% of a board of directors' members to be women, and the nation's corporate sector reached the target. 

Many times, governments don't want to get involved in the corporate sector, and more research is showing that recent financial performance of companies has been better with more gender balance. Equileap's work on the Russell 1000 from 2014 through the present shows that companies with higher gender equality scores outperformed those with the lowest scores.

France's experience with the the board legislation was so successful it is now asking for the C-suite to also be 30% women, going up to 40% in a few years.

"We can't find the women is not an excuse, it is a matter of where you are looking and how you are looking," according to Van Maasdijk.

But Equileap's CEO says even with the data on financial performance and diversity, the truth today remains largely that "when legislation is forcing, it happens, and when there isn't legislation, it doesn't happen."

In 2018, California became the first U.S. state to pass a law mandating gender diversity on corporate boards based in the state. That coincided with a period of rising female representation on boards. In 2020, the state went farther, with a law requiring publicly traded companies based in California to have at least one board member from among underrepresented races, ethnic groups and the LGBTQ community. But a California court recently ruled the 2020 law unconstitutional.

The summary judgment against the state from Judge Terry Green of Los Angeles County Superior Court didn't explain the court's reasoning, though the judge had previously described the law as "a bit arbitrary."

The successful lawsuit from conservative-leaning legal group Judicial Watch argued that the California law violated the state's constitutional equal protection clause, while the state argued that the measure didn't discriminate. California also noted that while firms can be fined for not complying with the law, the state had taken no action against any companies even though many in the state had yet to comply with the law's disclosure requirement.

The 2018 law on gender diversity faces a separate legal challenge brought by Judicial Watch. It is also targeting a Nasdaq rule on corporate diversity for companies listed on its exchange.

Childers says legislation should be a last resort.

"I hope it doesn't take legislation and I have optimism about what has happened over the past few years," she said. "We used to be in a world where the C-suite still needed to be told the business case for diversity. Now they know the business case, but the action hasn't started. I would hope it would start without the force function of legislation, but we have been an advocate of legislation where action is not happening fast enough." 

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