Home Business "Twokenism" is the new tokenism on the board

"Twokenism" is the new tokenism on the board

California has recently passed a historic law requiring that the boards of public companies based in the state should include at least one woman. With just over 20 percent of the seats of S & P 500 board members, it is no surprise that progressive legislators are pushing companies to diversify their board members. This pressure is part of a larger wave of growing public observation of compositional composition. A reasonable question, however, is whether this type of public test is likely to move the needle in terms of diversity in the boardroom. To what extent is the composition of the plates characterized by external pressure and inspection?

We recently reviewed this issue in a paper published in the journal Academy of Management. We analyzed the data of all directors in the S & P 500 boards in 2013 – the most recent data at the time of our study. Our question was this: do boards seem to be "gaming diversity" to please the critics, or are they trying to involve as many qualified women as possible? To find out, we first calculated the number of women on all boards of the S & P 500. Then we compared those numbers to the counts you would expect when the existing directors played a game of music chairs and came into the chair entirely by chance.

Why did we do that and what can it tell us? Well, if companies work hard not to have female directors, we would expect to see much fewer boards with zero women than in our simulated game of music chairs. In fact, we found that 45 percent fewer directors do not have women than you would expect due to our reshuffling practices. This finding suggests that the Boards of Directors are making efforts to prevent female directors from emerging without statutory requirements. In other words, if boards were not strategic in terms of diversity, some would randomly not include women (because there are not many female directors), but 45 percent fewer women do not have women than chance would predict the number of women who are already sitting on boards).

This finding may not be surprising, given the immense negative press that leadership teams face due to lack of diversity, especially given the evidence that gender diversity improves team performance. Let's take a look at the way Twitter was skewered in the media, for example, for his first public offering of zero women on the board. The way in which President Trump's Cabinet has been criticized by the media is the lack of gender diversity and the way the # OscarsSoWhite movement emerged from the lack of racial diversity in the Oscar nominations.

It is certainly a good thing for companies to work hard to avoid female directors. But is this because of a true commitment to diversity based on an understanding of the many benefits, or could it be rooted in fear of public scrutiny? To focus on this question, we examined whether the boards seem to recruit as many women as possible, or instead seek a socially acceptable level of gender diversity and then limit their efforts.

At the time of our study, the average executive board comprised just under two women. When boards diversify because they fear public scrutiny, you may expect them to diversify just enough to outperform and not stand out. If boards diversify as much as possible, there should be no indication of this type of game. In our board data, we find that there are 45 percent more boards exactly two women, who, according to our game with music chairs, would be expected by accident. We call this phenomenon "Twokenism".

In short, the Boards have been working hard to recruit two women, and the effort seems to have gone down, presumably because they have reached the level of diversity that they consider satisfactory. Interestingly enough, this result is more pronounced for companies that are typically more represented in the media, which is consistent with the idea that Twokenism is a response to the expected test.

Undoubtedly, boards need to consider a variety of factors when adding members. It would be naive to ignore the complexity of the process. However, the complexity of the process does not explain our finding that a dramatically above average number of boards includes exactly two women. This is not about complexity.

Interestingly enough, we can trace the historical origins of Twokenism. In 2002 and 2003, when the average number of women in the boards was just under one, we saw a plethora of boards, including just one woman. In other words, tokenism was prevalent. In 2004, when a few more women entered the boardroom and the average number of women per board was above a table, a new standard was born. From 2005, the Twokenismus became dominant and the tokenism disappeared. We predict that the "threekenism" is upon us, especially as legislators and citizens continue to press the boards to drive diversity.

The new law in California is a legislature stating that men's boards in US companies are no longer acceptable, and suggests that the review by external regulators is further intensified. Our research suggests that diversification pressures have been influencing the composition of boards of directors for many years. We still have a long way to go until this pressure is enough to create parity, and now is the time to keep up the pressure because it works.


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