Diversity on Boards:Smart Business

Lisa LeveySenior Director, Advisory Services

September 22, 2005

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Agenda

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

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Catalyst Vision

A world that supports and encourages every woman in her

career aspirationsand places no limits on where her

skills and energy can take her

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About Catalyst

Advancing women in business since 1963

– Research– Advisory Services– Membership– Awards

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About Catalyst – Sample of Members

Alcoa, Inc.Alcan Inc.American Express CompanyBell Canada EnterprisesBest Buy Co., Inc.Booz Allen Hamilton, Inc.Cisco SystemsConAgra Foods, Inc.Dell Inc.Deloitte & ToucheDeutsche BankFannie MaeGeneral ElectricGeneral MotorsHarley DavidsonIBM CorporationJohnson & JohnsonJ.P. Morgan Chase & Co.Kraft Foods Inc.Limited Brands, Inc.

Marriott InternationalMcKinsey & Co.Microsoft CorporationMotorolaNextel Communications, Inc.Nordstrom, Inc.PepsiCo, Inc.Pfizer Inc.Raytheon CompanyScotiabankSempra EnergyShell OilThe Goldman Sachs Group, Inc.The Home DepotThe Procter and Gamble CompanyTIAA-CREFTime WarnerTransCanada Pipelines LimitedUnileverXerox Corporation

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“Business Case” for Diversity

According to 107 top U.S. companies and firms:

Competitive advantage (89%) Improve retention (59%) Improve marketing/sales results (46%) Improve recruitment (46%) Enhance creativity and innovation

(41%) Respond to legal requirements (7%)

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“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

© CatalystSource: Catalyst, The Bottom Line: Connecting Corporate Performance and Gender

Diversity, 2004

Gender Diversity and The Bottom Line

95.3 %

127.7 %

Top-Quartile Companies [have the most women]

Bottom-Quartile Companies [have the fewest women]

34% or 32.4Percentage points

Average TRS

In terms of both ROE and TRS, on average, top-quartile companies financially outperformed bottom-quartile companies

13.1 %

17.7 %

Top-Quartile Companies [have the most women]

Bottom-Quartile Companies [have the fewest women]

Average ROE

35% or 4.6 percentage points

© Catalyst Source: 2002 Creating a Business Case for Diversity, Part of the Catalyst Making Change Series

Building The Business Case

Elements of the Business Case

Increase Revenues Reduce Costs

Get the most from your people

Attracting new customers; finding new markets

Building customer loyalty; retaining existing business

Keeping your growth strategy from running out of fuel

Eliminating differential turnover across demographic groups

How can we improve bottom-line results?

Increase Productivity Tapping into top talent Motivating all employees to do their personal

best Maximize the value of diverse teams –

innovation, creativity, and quality

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Catalyst Pyramid

U.S. Canada

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Catalyst Census of Women Board Directors

13.6%

86.4%

WomenMen

Percentage of board seats held by women:

Source: Catalyst Census of Women Board Directors

11.2%

88.8%

U.S. Canada

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Percent of Board Seats Held by Women in top 500

Companies

*Source: 2003 Catalyst Census of Women Board Directors

U.S.

Canada

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Number of U.S. Companies with Women Directors, 1995-2003

238

208

54

166

238

9619952003

Zero Women

One Woman

Two or more Women

*Source: 2003 Catalyst Census of Women Board Directors

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What’s the Problem?

Not a pipeline issue! Women face unique barriers

– Lack of access to informal networks– Lack of mentoring– Stereotypes about capabilities and

preferences– Work-life challenges

The good news – CEOs increasingly see diversity as their responsibility to drive change

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The Changing Landscape

What Some Believe

CEO essential

Not enough women at high enough level

No way to find them

A woman would be too different

One is enough!

What Others Realize

Enough existing CEO representation

Male CEOs need to mind own company

Add other qualifications to talent base

Reflect stakeholders

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Impact of Sarbanes-Oxley

Nominating committees become the 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”

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The Process - How It Happens

Referrals, referrals, referrals!!

Exposure to qualified women (and men!)

CEOs or nominating committee

Search firms

Alliance for Board Diversity

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Desirable Profile(s) For F1000

Line management positions with profit and loss responsibility

Financial expertise; other deep functional expertise; relevant industry-specific knowledge

Powerful connections

International experience a plus, but rarely the only requirement

“Soft characteristics” equally important

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What Can Women Do?

Have a game plan Obtain leadership experience Get line/operating experience Be well-grounded in

finance/business Be visible – seek high visibility

assignments Ask for what you want

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Why Bother?

Contribute at highest decision-making level

Influence and change the world Broaden general business knowledge Develop new skills/areas of expertise to apply

to own career; expand professional network Provides prestige and remuneration

Act as role models and beacons of hope for

other women

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What Can Business Leaders Do?

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

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Conclusions

Diversity is a business imperative Progress has been incremental but

change is possible Women face unique barriers that

are not obvious to their male counterparts

The landscape for diversity in the boardroom is changing

Women and business leaders are both part of the solution