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By the numbers, corporate progress on gender diversity is a failure

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Anat Ashkenazi, who was appointed CFO at Eli Lilly in 2021 noticed something that frustrated her: She was the only female CFO within the biopharma industry.

It was an easy path, according to Ashkenazi, who moved 21 years ago from Israel and came from a culture where there had been less gender inequality. Ashkenazi (CNBC CFO council member) said, “I never thought about being the sole woman in the room.”

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. 

Equileap data has shown that while the U.S. performs better than other countries with 15% of its female CFOs working in large organizations, it still falls well short of Canada’s 19%.

Equileap CEO Diana van Maasdijk, co-founder of Equileap, stated that everyone is poor and the U.S. does not do well.

Only 1% of the 4000 companies in Equileap’s study have a female chief financial officer and CEO.

“The adage that it’s lonely at top … it becomes lonely at an even earlier management level, director or v.p. Carolyn Childers is the co-founder and CEO at Chief. The professional network that focuses on getting women high up in the corporate ladder into top positions, Childers explained.

Kolder Associates in the United States. They analyze the composition of the C-suite across Fortune 1000 and S&P 500, and report that the U.S. had just below 15% female CFOs as of last year.|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.

Many headlines have highlighted the success, but Josh Crist is the co-managing partnership of the search firm and focuses on financial executives. He stated, “That number is extraordinaryly low.” He said that gender diversity was ahead of racial diversification in CFO positions and the C-suite but by a small margin. The numbers and the population are important, so we’re talking about a huge gap.

Ashkenazi’s focus is on how to make it easier for women to become CFOs and, more broadly, to better understand women’s journeys in corporate America. Lilly has conducted an in-depth study of the progression of women and overlayed it with other demographic variables, like race and ethnicity. This helped her understand why some women are not advancing at different levels. She said, “We wanted the truth about why women don’t progress and that our findings aren’t unique to Lilly.” It is not something that many businesses are willing to spend much time or resources on,” she said.

According to her, it could take between 30 and 40 years for gender equality to reach the top of the corporate ladder.

Equileap says it might take much longer. Since the 1970s, women have graduated from university with an average number, or more than, of good degrees. It has taken them a long time to be able to hold these jobs.

CFOs make 15% but CEOs make 6%, in a country with the most powerful economy and amazing universities. It is amazing! Van Maasdijk said. We believe that the correct number should be between 40% and 60%. The world’s 51% female population cannot be balanced beyond this point.

Equileap estimates that gender equality targets of equal population might not reach their current levels at present, given the pace of progress. Van Maasdijk stated, “That doesn’t just apply to daughters and granddaughters.”

What can be done to make it happen?

It is important to change the way that C-suite searches are conducted. 

Crist states that this begins with the selection of interview candidates. The search should be tilted so that 75% rather than 25% of the candidates are diverse. The latter is more common today – for example, four of twelve candidates being diverse, rather than eight out of twelve.

Childers says that the interviewees are typically the same four people who were on the list and who have been pinged by multiple companies. According to Childers, “The same people get picked all the time and we need more broadening our thinking about qualifications than a CFO at X particular company.” 

Crist states that companies often say they desire to be more diverse but then rely on a single approach to hire the best candidates. This leads to many qualified applicants being overlooked. 

Childers says that CFO searches can take a lot of time and are not easy. They are able to see the best of what you can do and they will not accept diversity.

Achieving 75% diversity may indicate that candidates are not from the same industry and have less years of experience. However, boards realize that not all “best” candidates are in the same industry. Crist stated that boards are still stuck in the “we must check all boxes” mindset during recruiting. If we do not check these boxes, we will fail to recruit. 

This mindset must change throughout the talent pipeline, not just at the C-suite.

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. The data that shows the source of previous head coaches’ sources will show that there are greater chances of them being different. 

Crist believes that 100,000 workers would expect to have someone capable of training them for the job. The companies are the ones that have to do this. A Fortune 50 company has a finance department of 3,000 employees. You would expect that there would be someone highly skilled and varied. 

Equileap states that the minimum level of candidate interviews for open positions should be at least 50/50. This will force search teams to eliminate candidates from smaller organizations who are not likely to make the cut. This cycle will be broken if companies are able to reach 50-50 percent in their recruitment pipeline.

Childers says that more women will be elected to CFO positions, which in turn, will increase board representation. Boards are seeking CFOs for audit committees. She says, “It unlocks your next opportunity.”

When all else fails — and the data shows that today that case can still be made — legislation is another option. Equileap data over the last five years shows that legislation is strongly linked to better representation. France mandates that at least 40% of the board’s members be women. The target was met by France’s corporate sector. 

Governments are often reluctant to invest in the corporate sector. However, more recent research shows that companies with a greater gender ratio have had better financial results. Equileap has found that firms with higher scores for gender equality outperform those with lower scores.

France’s board legislation experience was so positive that France is asking for 30% more women to the C-suite, and possibly 40% over the next few years.

Van Maasdijk states, “We don’t know where the women are. That is no excuse.

Equileap’s CEO, however, says the reality is, “When legislation is forced, it happens.”

California, the United States’ first state to pass legislation mandating gender diversity for corporate boards with headquarters in California, became law in 2018. It also coincided well with the rise in representation of women on boards. The state took it one step further in 2020 when they passed a law that required publicly traded California companies to include at least one member of the LGBTQ community on their boards. However, a California court has recently approved the California law. ruled the 2020 law unconstitutional.

Although the summary judgment of Judge Terry Green from Los Angeles County Superior Court against the State was not explained by the court, the judge had already previously. described the law as “a bit arbitrary.”

Judicial Watch, a conservative-leaning legal organization, filed a successful suit claiming that California’s law was in violation of the constitution’s equal protection clause. The state countered that it didn’t discriminate. California noted that, while companies can be penalized for failing to follow the law, no state action was taken against any company despite the fact that many of the state’s employees had not yet met the disclosure requirements.

Judicial Watch is bringing a different legal challenge to the 2018 law regarding gender diversity. Judicial Watch is also suing to challenge a Nasdaq rule regarding corporate diversity in companies that are listed on the exchange.

Childers believes legislation should only be used as a last resort.

She said, “I hope it doesn’t take legislation but I am optimistic about the events of these past years.” The world we used to live was one where C-suite needed to hear the business case to support diversity. The business case is now known, but action has not started. Although I wish it would happen without legislation’s force function, however we advocate legislation when things are not moving quickly enough. 

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