interviews with five board members in Toronto prior to conceptual model design. Trust ..... four women and three men had real estate board experience.
CHAMPIONING “TOUGH ISSUES”: HOW WOMEN AND MEN CORPORATE DIRECTORS CONTRIBUTE DIFFERENTLY TO BOARD DELIBERATIONS
By
Nancy E. McInerney-Lacombe Submitted in Partial Fulfillment of the Requirements for the Qualitative Research Report in the Executive Doctor of Management Program at the Weatherhead School of Management Advisors: Diana Bilimoria, PhD Sheri J. Perelli, EDM Paul F. Salipante, PhD
CASE WESTERN RESERVE UNIVERSITY December 2007
CHAMPIONING DIFFICULT ISSUES: HOW WOMEN AND MEN CORPORATE DIRECTORS CONTRIBUTE DIFFERENTLY TO BOARD DELIBERATIONS
ABSTRACT A qualitative study of eleven male and eleven female directors was undertaken to investigate gender differences relating to championing tough issues at the board. This study demonstrated that men and women at the board share common mechanisms in the championing process. Correspondingly, they also evidenced notable differences. A championing model is presented to examine the gendered differences of the “tough issues” championing process. The model incorporates (1) the preconditions to championing, (2) the board environment that impacts the choice to champion (3) the influencing factors that impact the engagement process (4) the engagement style of the champions and (5) the collateral benefits (or not) of having championed the issue. Consistent with Kramer, Konrad and Ekrut (2006), women championed twice the number of issues as men in this sample. Both male and female directors championed very difficult issues; the majority of which related to the CEO including leadership ability, performance, management style and compensation. Directors agreed that the benefits to the board and the individual champion did outweigh the difficulties of the champion process. As a result, champions of tough issues have a unique role to play in improving the decision-making quality of boards.
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TABLE OF CONTENTS Abstract ..................................................................................................................................... 2 Introduction............................................................................................................................... 4 Research Question and Conceptual Model ............................................................................... 4 Literature Review...................................................................................................................... 7 Methods..................................................................................................................................... 7 Findings................................................................................................................................... 21 Discussion ............................................................................................................................... 35 Limitations .............................................................................................................................. 40 List of Figures Figure 1: Tough Issues Conceptual Model ................................................................ 5 Figure 2: Data Analysis Sequence: .......................................................................... 18 Figure 3: The Relative Power of the Board verses the CEO ................................... 22 Figure 4: The Level of Preparation for Board Meetings.......................................... 22 Figure 5: Gender Sensitivities.................................................................................. 23 Figure 6: Tough Issues............................................................................................. 24 Figure 7: Courage .................................................................................................... 26 Figure 8: Mindfulness .............................................................................................. 26 Figure 9: Expertise................................................................................................... 27 Figure 10: Legitimacy................................................................................................ 27 Figure 11: Maieutic Inquiry ....................................................................................... 29 Figure 12: Structure of Engagement with Limited Off-Line- Women ...................... 30 Figure 13: Persistence and Resilience........................................................................ 31 Figure 14: Persuasion................................................................................................. 32 Figure 15: Structure of Engagement with Fairly Extensive Off-Line- Men.............. 33 Figure 16: Deference.................................................................................................. 34 Figure 17: "Tough Issues" Championing Process Model .......................................... 40 List of Tables Table 1: Open Coding................................................................................................ 19 Table 2: Coded Themes ............................................................................................. 20
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INTRODUCTION Boards of Directors are often criticized for being compliant or silent on critical issues (Van den Berge & Levrau, 2003 citing Bryne, 2002; Drucker, 1974; Lorsch & MacIver, 1989). In the powerful yet collegial environment of the board, raising difficult issues has proven to be very challenging (Lorsch, 1995; Leblanc, 2005). In a recent study exploring the effects of women directors on corporate boards, CEO respondents (male and female) reported that women directors were more prepared to push “tough issues” than were their male counterparts (Kramer, Konrad, Erkut, 2006). When women champion intractable issues in boardroom deliberations, however, it is not clear how and why they do it and whether they do it differently than men. The absence of specific empirical inquiry about gender differences in the management of tough board issues motivated the present study based on semi-structured interviews with male and female board members. As a precursor to the actual study, five preliminary interviews with women board members were undertaken. Boards that create an environment where constructive controversy (Johnson, Johnson & Tjosvold, 2000) is encouraged on tough issues avoid the perils of shirking the issues (Janis, 1992) and move the board to higher level performance (Sonnenfeld, 2002; Leblanc & Gillies, 2005). Understanding the tough issues championing process may be particularly important to assist boards in building an environment that “creates the discursive space” (Fletcher, 1988: 165) to entertain difficult issues, not stifle them. RESEARCH QUESTION AND CONCEPTUAL MODEL When directors champion difficult or tough issues at the board table, how and why do they do it, and do women do it differently than men? What collateral benefits does this have for the individual director as well as the board? 4
To address these research questions by guiding semi-structured interviews with male and female board members, we proposed a conceptual model (Figure 1 below); informed by the literature in three specific domains. FIGURE 1: Tough Issues Conceptual Model
CHAMPION TOUGH ISSUES
CHAMPIONING PROCESS
HIGH TENSION PRECONDITIONS
• Framing (the problem)
OUTCOMES
• Individual As Agent
• Engaging (the Board)
• Preparedness
• Decisioning (the problem)
• Motives and Honorable Intentions
• Resolving (conflict)
• Work Through Team
• Board Performance • Changed Status / Power Outcomes
• Agreeing (consensus)
LOW TENSION Incubator
Persistence
Resilience
The conceptual model suggests, as argued by Druskat (Druskat & Kayes, 2000), that that there may be significant positive outcomes for the board and the champion of the tough issues when such matters are raised, debated and resolved in the boardroom. We define “tough issues” as those that may remain uncomfortably under the surface until a champion places them on the table for discussion. They may appear divisive and board members may be reluctant to address them fearing impact on the collegiality of the board as a group. The preconditions supporting the championing process include a strong degree of personal 5
agency where the board member accepts the responsibility to raise the issue, preparedness to tackle the questions and push back if necessary and honorable intentions which enamor the champion to the group, thereby facilitating the ability of the champion to engage the group and manage team dynamics to the expected outcome. Our conceptual model was anchored in Agency Theory and influenced by deviance and group conflict theories. Independent Variables The concept of agency responsibility as introduced by Jensen and Meckling (1976) and expanded by Sewell (1992) to include personal agency was used to understand individual as agent and to offer an explanation as to “why” board members may tackle tough issues. Positive Deviance Theory was reviewed to address the model’s three remaining independent variables: preparedness, motives and honorable intentions and working through team. These latter variables provide a context of possibility about “how” women and men are able to present a tough issue in a stressful board environment. Moderating Variables The model’s moderating variables were identified during the conduct of investigative interviews with five board members in Toronto prior to conceptual model design. Trust (distrust), inclusion (exclusion), influence (no influence) and cohesion (lack of cohesion), are suggested to impact the championing process by assisting or hindering outcomes. Mediating Variables Conflict Theory underpins the examination of the persistence and resilience forces which appear to be at play through the conflict process. The incubator analogy was used in the model to absorb the tension at the board table; to support a move forward (persistence) 6
on the issue at a time of low tension or a need to pull back and wait (resilience) if the group becomes mired in conflict. The championing process is expected to include a number of unique stages: framing the problem, engaging the board, decisioning the problem, resolving conflict, and moving the board to consensus. Dependent Variables Lastly, a potential explanation of the effectiveness outcomes was offered: performance outcomes and changed power/status outcomes, which were to be realized from the resolved issue. LITERATURE REVIEW This literature review focused in three main areas: the structuralist, behavioralist and the social structure approaches. The structuralists reviewed the design of the board, its reporting lines and board demographics. The behavioralists have focused on trust between the board members: power relationships, biases, minority verses majority positions and decision-making. The third and most recently published body of work, looks at the Board of Directors as a social system with its own culture, norms, values and “rules of the game”; the emphasis being on the interplay between directors and, at a second level, between directors and management. These fields of study combine to form a rich, sometimes contradictory foundation of knowledge, through which to view and review the very complex issue of board performance and the role that women and men can play at the board table. Structuralist Approach Agency Theory, the foundation for the structuralist approach, proposed that inefficiencies evolve from the separation of a company’s management and its ownership. It 7
reviewed the board, acting responsibly within its mandate of "duty of care", as the monitor of management, directing management's self-interest through properly designed compensation/incentive packages (Jensen and Meckling, 1976). Jensen and Meckling (1976) identified one level of agency, that of management as agents of the owners, who, in turn, are represented by the board. The board, however, has an equal agency role vis-à-vis the owners (shareholders) and each agent of the board (individual directors) exerts personal agency in executing their fiduciary responsibilities. Sewell (1992) supports this explanation, positing that the capacity for agency--- for desiring, for forming intentions and for acting--- is the ability to coordinate one’s actions with and against others, to form collective projects, to persuade, to coerce and to monitor the simultaneous effects of one’s own and other activities. This agency responsibility is significant, requiring board members to be proactive and agentic vis-à-vis management. However, as management’s expertise is valued (Baysinger, Kosnik and Turk, 1991), it takes tenacity to question management’s judgments and recommendations (Janis, 1992; Leblanc, 2005). This is especially true if management is long tenured and powerful (Arthur, 2001). There is no empirical evidence to support the belief that independent Boards of Directors result in improved performance (Dalton, Daily, Johnson and Ellstrand, 1998). Practitioners argue that it is not independent directors that make a difference; rather, it is directors that “act” independently. It is this independence, the action of championing difficult issues, where independent directors truly exercise their agency role. Twenge (2001) explains that advances in employment and education are accompanied by psychological changes in the form of increasing assertiveness (personal agency) in women. Could this heightened personal agency explain why women are said to push “tough issues” more than men (Kramer 8
et al, 2005)? Behavioralist Approach Many researchers have examined how and why boards make decisions. Some authors argue that because outside directors share beliefs, values and norms with senior management (through numerous social ties), this shared experience inhibits the Board of Directors from criticizing or being "too tough" on management (Golden-Biddle & Rao, 1997). Board membership has evolved through an unspoken reciprocity arrangement between CEOs and other board members. It is not unusual for CEOs to sit on each other’s boards and, through these board interlocks, strong loyalties develop. Davis (1991) showed these interlock networks create a social context that favors management; functioning as a mechanism for the cohesiveness and continuity of elite social groups. How, then, can boards avoid being dominated, co-opted and controlled by management? Some would argue (Westphal, 1999; Salipante & Morrison, 2006) that stronger CEO/board collaboration coupled with proper monitoring mechanisms can lead to better performance. Fama and Jensen (1983) argued that social ties enhance firm performance through a board’s extended involvement beyond decision control to decision management. Golden-Biddle’s (1997) observation that “ties that bind, can also blind," suggests too much, not too little, cohesion in the boardroom may be problematic. Male loyalty is particularly important to understanding why women are so underrepresented in the boardroom and on certain committees. Bilimoria (Bilimoria & Piderit, 1994) showed a sex bias in board committee selection where sex discrimination was evident in appointing women to the more "powerful" board committees − in spite of qualifications that were equal to or greater than those of male candidates. Bilimoria’s findings refuted Kesner’s (1988) 9
suggestion that with greater board experience, women would eventually graduate to the more important committees. Today, almost twenty years after Kesner’s original study, some women have graduated to chair the board or chair the more powerful committees, however, the low level of female participation overall on corporate boards is still a reality. For decision-making tasks, diversity of membership, both inherent and role-related, is desirable for increasing the number of solutions offered and alternatives considered by the group (Maznevski, 1994). While mixed-sex groups can outperform same-sex groups in some situations, some research studies have found that same-sex groups have better overall performance (Kanter, 1993). Further, Kanter (1993) showed that one woman placed in a male dominated group is marginalized and becomes less effective, mainly due to stereotyping. Boards, in general, have not done an effective job of ensuring a healthy level of gender diversity within the board team which reflects poorly on their membership. Cohen and Bailey (1997) cite Magjuka and Baldwin (1991) who showed that teams with greater diversity evaluated their effectiveness more positively and offer possible explanations for this assessment ranging from better use of member knowledge to better communication and cooperation with external groups. Jehn (1995), in her work on groups and management teams, showed that for non-routine tasks, task conflict was not detrimental; in fact, it appeared to promote critical evaluation of problems and options while concurrently reducing thoughtless agreement. These conclusions offer some interesting applications for the study of directors championing difficult issues on boards and are consistent with Druskat’s (Druskat & Kayes, 2000) findings that long-term groups that were able to ride out conflict did, in fact, become stronger as a result.
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Social Structure Approach Sonnenfeld (2002) argues that effective boards are a “robust social system”. The author posits that there are certain elements of an effective board that can be emulated. This author suggests that one of the key elements, if not the key element, is the ability of a board to foster a culture of open dissent, acknowledging that dissent does not mean disloyalty. Leblanc (2005) reinforces the social system model, describing the board as a functioning body (social system) and focuses on how boards make decisions as a group. Leblanc and Gillies (2005), through an exhaustive “in boardroom” qualitative study, identified the most functional male directors as those who were able to persuade other directors to their point of view and worked well with their fellow directors in problem solving, roles generally aligned with their description of “change agent” and “challenger. Much of their work supports the advantage of pushing the difficult issues to drive sound decision-making to improve board performance. Fletcher’s relational practice findings in her 1998 study identified four categories of activities that constituted relational practice in a mixed-sex organizational setting: preserving, mutual empowering, achieving and creating team. Fletcher’s (1998) work adds additional depth, as well, to the survival mechanisms identified in the practitioner analysis of the interviewees presented in this paper. Fletcher’s practice of “achieving” dovetails well with the “individual as agent”. In addition, the author identifies the concept of “preserving” as a sign of competence and commitment. The underlying belief she proposes is that everyone must put the needs of the project ahead of individual issues, which supports the “honorable intentions/motives mechanism” expressed by women championing difficult issues. Viewing the Board as a functioning social system, developing its own norms, values, 11
culture and “rules of the game” for its decision making processes, is a more holistic approach to understanding Board performance than we have seen in most of the past literature. Not unlike any social system, however, the Board’s ability to self-govern is critical to its ability to meet its mandate to protect shareholder interests. Understanding the difficult issues phenomenon within this context of social structure is best accomplished through a review of the small group research literature specifically aimed at member deviance in a group. Wellen and Neale (2006) investigated how deviant individuals affect group life and influence the work experiences of all group members. In line with much of the deviance literature their focus is negative deviance, with one example of positive deviance (working harder than anyone else). Interestingly, there was a negative group reaction to the positive deviant, albeit, not as strong as the reaction to the negative one. This negative reaction to a positive deviant, while studied, appears not to have been tested longitudinally. Spreitzer and Sonenshein (2004) focus solely on positive deviants and propose a definition, within positive organizational studies (POS), of a positive deviant who exhibits intentional behaviors that depart from the norms of the referent group in honorable ways, more substantial than just “small acts of consideration” (Spreitzer, McCall & Mahoney, 1997 quoting Van Dyne and Lepine, 1998). The authors argue that positive deviance is not only an individual construct, as suggested by Warren (2003), but also something that can occur at the organizational level. The importance of this work in the area of positive deviance for this study is exciting as Spreitzer and Sonenshein (2004) highlight the pre-conditions facilitating positive deviance which include: meaning, self-determination, other focus, self-efficacy and courage. This profile correlates with certain themes and survival mechanisms of the “tough issues” champion, specifically individual as agent, preparedness and motives/honorable 12
intentions. Rich literature exists on conflict management in small groups. Two broad schools of thought include: conflicts over resources and information (Sell, Lovaglia, Mannix, Samuelson, and Wilson, 2004) on the one hand and task and relationship conflict on the other (Jehn, 1995). Further, within this body of research, there is only a certain level of agreement that group conflict is positive (Sell, et al., 2004). Supporting the positive, Lewicki (Lewicki, McAllister, & Beis, 1998) indicates that if individuals in conflict trust each other, they can work through the conflict. The level of ease is related to trust but, in a board setting, trust is complicated by the power relationships within the group and the scope of status individuals (low verses high), which can heighten the pitch of discussion and ultimate decision making (Lewicki, et al., 1998). Women are normally viewed as low power, low status in groups (Ridgeway, 1982). The board is no different. However, Mechanic (1962) proposed that low status individuals could gain power in a group through carefully directed effort and expertise. Boards of Directors, to be or to become effective social systems, need to be able to work well enough together to get the job done. Salipante and Morrison (2006) argue that monitoring and collaboration between management and the board is not only possible but is advisable. The challenge for every Board is to build an environment where the values and norms of the Board, as an operating system, support rigorous task conflict while at the same time promote relationship conflict resolution. Turner (1967) developed the concept of liminality from the “rites of passage” work completed by Van Gannep which offers an interesting structural interpretation and means of understanding the unique position of women on boards. Turner argues (1967) that for every social formation (board) there is a dominant mode of public liminality. Liminal individuals are those in a transitional state, 13
betwixt and between out-group and in-group status. Women interviewees’ experiences suggest they experience this liminal status when in the process of championing a divergent viewpoint from the group – particularly, (1) experiencing a certain distance from the norms of the dominantly male groups while in full-throttle deliberative discussions, (2) yet not allowing themselves to be marginalized through the process, (3) learning how to have impact at the board, and (4) experiencing increased inclusion and status, coined “communitas” by Turner ( 1967), once the issue is resolved. They may have learned to change the system from within as tempered radicals in the dominant male corporate world (Meyerson & Scully, 1995) and simply apply these learnings to the male-dominated boardroom environment, helping their boards overcome groupthink and the risk of shirking issues (Janis, 1972) by championing difficult issues when warranted. In a meta-analysis of leadership styles, Eagly (2007: 5) argued that women, more than men, lead in styles that recommend them for leadership. Women exhibited behaviors more akin to transformational leadership than men. Men, on the other hand, displayed behaviors that included avoiding problem-solving until the problem is acute. Women directors’ work and leadership styles, more than men directors’, may thus encourage the championing of tough issues discussions when warranted and their emphasis on rational argumentation and respect at the board table consistent with Johnson, Johnson & Tjosvold’s (2000) constructive controversy thinking may press the board to move beyond satisficing (Simon, 1996) to reach higher quality and more creative solutions. METHODS Methodology We conducted qualitative research using semi-structured interviews as our principle methodology. The selection of the qualitative method over other methods, fit the research 14
objective of attempting to understand the experience of directors dealing with difficult issues. This approach was clearly in line with Glaser and Strauss’s (1967: 18) view that qualitative research is often the most “adequate” and “efficient” way to obtain the type of information required and to contend with the difficulties of the empirical situation. Qualitative methods are uniquely suited to a research problem that requires obtaining insights into people’s motivations, experiences, reactions and feelings regarding a particular phenomenon (Strauss and Corbin, 1998) to understand their overall impact and outcome. The qualitative method was viewed as the most appropriate methodology to investigate the championing of tough issues phenomenon for these reasons. The empirical data collected through interviews using semi-structured questions will provide the foundation for the development of grounded theory to understand and explain the problem of practice (Spradley, 1979). Interviewees were encouraged to develop their stories and were not held to a rigid protocol within the existing time constraints. This permitted the researcher to explore new avenues of questioning in subsequent interviews to probe. The process employed was reflexive (Frost & Stablein, 1992) and iterative between theory and empirical findings, in line with Glaser and Strauss (1967) recommendation for the development of grounded theory. Continually moving between theory and data enabled the researcher to maintain a focus on the problem of practice without sacrificing or satisficing (Simon, 1996) with respect to the theoretical framework being developed. . Sample Twenty two members of Canadian and US boards participated in this study. Participants were selected from among 30 individuals referred to the researcher by professional colleagues. Eleven participants were female and eleven were male. With the 15
exception of two, all interviewees are domiciled in Canada. While the majority of the board experience centered in Toronto, there was representation across Canada and in the United States, with one director domiciled and represented on boards in the Caribbean. Respondent’s included relatively new board members (one) in their forties to very experienced board members in their seventies (two). The age span of the male interviewees (fifties to seventies) was similar to the female participants (forties to sixties), but the majority of the interviewees were in their fifties and sixties. This broad age spectrum (forties to seventies) provided an interesting basis for comparison which many of the interviewees expressed in the interview, noting a sea change in board experience from “the old days” to what it was today. All interviewees were university graduates and of a middle to upper class socio-economic status. All were experienced business professionals with either legal, accounting, and/or business school (MBA) backgrounds. Two of the interviewees held doctorate degrees. Eight were or had had experience as CEOs. Nine participants served on boards of financial institutions including banking, insurance, and investment companies; seven were on real estate company boards with the remainder a mix of industries. All participants had multiple board experience. In approximately 30% of the cases, interviewees held or had held board seats on the most prestigious and established boards in Canada. The gender mix was fairly balanced based on professional experience and board type. For example, four women and five men had financial institution board experience whereas four women and three men had real estate board experience. The remainder of the sample was broadly based across industry type.
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Data Collection Initial contact with 30 potential interviewees was made by email and/or telephone following colleague referrals. These contacts provided the opportunity to explain the EDM program, the qualitative research being undertaken and the informed consent documentation. Interviewees were given the option of a face-to-face interview (the researcher’s indicated preference) or a telephone interview. These were set at a time and venue convenient to the participant. Twelve participants opted for face-to-face interviews in their offices in Toronto. Only two in-town participants (one male/one female) opted for telephone interviews. The remaining out-of-town participants selected the telephone option. Maxwell’s (2005) situation-specific interview process was relied upon to develop an interview protocol used with all respondents. The guide allowed interviewee’s personal experience and stories to emerge as recommended by Spradley (1975). Questions and probes in each of the interviews were tailored to the interviewee’s personal experience and reflections and did not necessarily conform to the interview protocol 100%. The interviews averaged 60 minutes and most were tape recorded. All interviews were transcribed by the researcher. This was required due to the interviewees’ concern regarding confidentiality and the added risk of using a third party provider. In the three cases where the interviewee preferred not to be taped, interview notes were transcribed as soon as possible after the interview. All transcriptions were then loaded into a coding software system (MAXQDI). It was explained to all interviewees that the main focus of the interview would be to understand the interviewee’s experience when championing difficult issues at the board. The key questions related to the championing process − how and why did they raise the issue and 17
what was the process they had to go through to engage the board to resolve the issue. Numerous probes were used to understand the impact of issues, such as trust, influence, credibility, inclusion, conflict, off-line discussions, among others that individual interviewees raised while telling their stories. At the conclusion of the interview, each participant was provided an opportunity to expand upon his/her earlier commentary or provide additional information. This final question sometimes introduced issues not covered earlier. Additionally, the researcher made notes during the taping of all interviews, noting important comments and references and these notes were used as a journal when transcribing the interviews and referenced during the analysis. Data Analysis FIGURE 2: Data Analysis Sequence: As recommended by Maxwell (2005) and Boyatzis (1998), an iterative process Coding for Themes
of data examination prior to formal data analysis was pursued. Interview transcripts were read, re-read and deliberated over as they became available
Open Coding (3) Listening to the Tapes
during the two month data collection period. Subsequently, multiple iterations of coding of the raw data were performed, complemented by fresh theoretical
Open Coding (1)(2) Sessions
research. Consistent with Clarke’s (2005) approach, the coding goal was to critically analyze the data to unearth distinctive analytic understandings and interpretations of the “tough issues” phenomenon. Open coding was first
Read & Reread Transcripts Many Times
performed. Data was coded according to male and female responses separately. Strauss and Corbin (1998: 223) equate open coding to working on a puzzle:
Transcribe the Tapes
dissecting the data to understand what is going on. 18
Table 1 below shows the results of three open coding iterations. The step up in session 3 in codable moments reflects the results of listening to the interview tapes repeatedly to ensure nuances within the discussions were not missed. Multiple coding of individual codable moments resulted. TABLE 1: Open Coding # Codes Coding Session Session 1 By Session 2 By Session 3
# Codable Moments Women
Men
61 48 33
48 36 22
843 855 958
The next analytical step was to develop major themes (Boyatzis, 1998) that emerged from the open coding, a process that involved thinking through and examining the data relative to the original model as well as emergent insights. Seven core themes emerged as outlined in Table 2. The codes were then organized within each of these “bins” (Maxwell 2005). Concurrent with this exercise, all codes with less than five citations were reviewed and either re-coded to a more fulsome code description or winnowed out. There was one exception to this rule. If a gendered code (e.g. male mindfulness) had very few citations and the same code for women had significant citations, the code was not eliminated. The contrast was viewed as being potentially useful as the analysis progressed. Seven additional coding passes through the data ensued, one for each of the core themes. The reduction of codable data reflected the strict cleansing of less fulsome data points throughout the transcripts. The final results of this exercise are presented in Table 2 below in which the data points are shown reduced from 958 to 539. The gender totals with women having 25% higher codable moments than the men, was consistent with the more detailed responses to the interview questions. 19
TABLE 2: Themes & Sub Themes Themes and Sub-Themes
Codes Shared Both Male & Female
Board Environment Change - Power of Board vs. CEO √ - Preparedness √ - Gender Sensitivities √ Tough Issues √ Personally Championed - Chair/CEO Related √ - Management team related √ - Company Sale - Strategic Issue √ - Disclosure Mechanisms Supporting Championing - Individual as Agent √ - Honorable Intentions √ - Preparedness √ - Courage - Mindfulness - Expertise - Legitimacy Influencers - Trust √ - Inclusion - Influence - Cohesion √ Structure of Engagement Maieutic Inquiry Formal Structure of Board/limited off-line Persistence/resilience Persuasion In/Out Formal Structure/fairly extensive off-line Deference Time to develop consensus √ Results of Efforts Board Outcomes √ Champion Outcomes √ Totals ** Women noting deference of men in the boardroom.
Codable Moments Male
Female
Male
Female
3 1 1 1
3 1 1 1
27 17 7 3
31 12 12 7
5
3
7
14
1 1 1 1 1
1 1
4 1 1
10 1 3 -
1 1
4
5
78
96
1 1
1 1 1 1 1
4 1 1 1 1 6 1
18 20 8 2 2 13 15 50 21 3 13 13 63 -
25 21 17 14 16 3 53 22 17 2 12 85 11
1
4
25
1 1
9
16 1
1 1 4 1 1 1 1 4
1 1 1 1 2 1 1 22
1** 1 2 1 1 23
12
-
31 7 12 7 5 237
24** 8 23 12 11 302
The six categories include: board environment ( the sea change in the board environment, post Enron), tough issues ( the issues which directors personally championed at the board, mirroring to a large extent the generic issues which directors cited as difficult), mechanisms for championing (factors which directors used to support their initiation of a tough issue, offering an explanation of why they did it), influencer variables that impacted 20
the championing process, structure of engagement (“how” they championed), and the results of efforts ( outcomes experienced as a result of the championing process). From these broad categories key research findings for both men and women emerged. FINDINGS Our findings suggest that board members today choose to champion very tough issues − women, surprisingly, at twice the rate as men. We found that tough issue champions use a variety of mechanisms and engagement processes to do their work – some of them gender specific. Tough issue champions work in board rooms that they describe as having changed significantly, post Enron. Exemplary environmental changes identified by our interviewees included: (a) the relative power of the board verses the CEO; (b) board member preparedness and (c) gender sensitivities. As illustrated in Figure 3 below, respondents reported a significant shift in board/CEO power and influence characterized by heightened awareness of board responsibility and liability and diminished opportunity for CEO control over board performance and agendas.
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FIGURE 3: The Relative Power of the Board verses the CEO Interviewee M10 W03 M01 W08 M03 M02
The Relative Power of the Board verses the CEO In the past, boards were very ineffective; they were mats (for the CEO) for quite a long time. Since Enron, it’s changed. Difficult issues (are) getting to the table…. more so than they did 5 or 6 years ago. 15 years ago, if you could not accept management's recommendation, they might resign or you might feel you had to fire them. Today, that equals independent thought, that's what the directors are there for. It's a huge change. The board has to take its responsibilities very seriously. There are difficult issues to be dealt with but it’s more upfront today, than 10/15 years ago. Compliant boards may still exist but they are acts of history. If you don’t go on record today, you are done. …probably the most difficult issue is facing up to the fact that you may not have a CEO that is up to scratch. I found it historically very difficult to get all our directors to come to grip with that issue. It's changing now.
Perceived boosts in board responsibility, power and influence, our interviewees reported, is evidenced by heightened board member preparedness. As illustrated in Figure 4 below, we recorded consistent acknowledgement that board members today prioritize preparation for board meetings far more than in the past. And, while this is true for both genders, men and women alike reported that women often surpass men in preparedness. This is consistent with the literature (Carli, 1999) which suggests that women are more likely to work harder than men. FIGURE 4: The Level of Preparation for Board Meetings
M10 W09
M06 W02
The Level of Preparation for Board Meetings (The difference is) night and day…In the late 60’s an audit committee (prepared) 8 hours per year…. (In the) 2000s, 150 to 200 hours. (And) now 250hours per year. My main rule is know your file inside out. You have to do the work. You have to go in there to the board with not a single question unanswered. It's that simple… you have to do the work. The female directors were really good. They knew what the task of the director was. Always better prepared. They took the job more seriously, I don't want to intimate that the men didn't take it seriously, but it was an important thing that they were doing and they wanted to do it well. My experience has been that women do much more of their homework. I have never seen a woman on any of the boards where a woman would come unprepared.
If women are more prepared on the boards they serve, they are, our data shows, also more respected. Our interviewees described the board environment for women as more tolerant and less dismissive than in the past. Figure 5 illustrates this change. 22
FIGURE 5: Gender Sensitivities
W10 W01 W09 W02 M10
Gender Sensitivities There is less….not patience, but you know, they would change the issue or would not be as attentive, pay attention as much to what a woman would say as a man. It is still there, there is still a difference but it is less apparent than it used to be. It’s better than it used to be. I think it is less dismissive of women, less token. You are there as you are adding some value. As well, they picked you not just because you are a woman. On gender in the boardroom, there’s more talking over you from the older guys. Younger ones are quicker to adjust. When I was younger, I would be dismissed earlier, but not now, now that I have a lot of board experience. I have been the only woman on the board many times, less now I think today if a woman finds her way into the board room, she is treated pretty much like everyone else. …..
Tough Issues Our interviewees described 21 instances of tough issues in the board room, − most of them human resources related. In fact, 14 (67%) of these examples specifically reflected some aspect of CEO leadership, performance, style or compensation. As previously noted, female directors championed twice the number of difficult issues as the men. Common themes emerged from their stories, including new insights into why and how they did it, and how the sexes differed in approach. How women and men describe their experiences in exemplified in Figure 6.
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FIGURE 6: Tough Issues Interviewee W03
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Tough Issues Women I also happened to be the chair of the HR committee, so, so it was my job to champion it. But I also… had a different view. A few of the directors seemed to have a lot of loyalty to the CEO, as opposed to being objective about, what we should be objective on: how is the company performing and how should we pay the CEO. And they seemed to just want to give him the ship if he waved his hand and I kept trying to say…here’s what the market is saying and this is excessive and I don’t see any reason why we should be doing this other than he wants it. I knew that what I was dealing with… I was dealing with an issue where I was the only woman on that board, where…some guys had some real loyalty to this guy, and he’d asked them to be on the board, and you know kind of the old boys’ network was at work here. It took me three and half to four years to get the CEO fired. I felt passionate about it. I had absolute conviction that this was the right thing to do. I still have the knife wounds on my back. That was when boards weren’t courageous. The board had previously been led around by the chair. Unfortunately the chair had selected integrity. I had two other strong board members that I brought on side and we worked for two full years changing this board. I was not alone. We did our work up; established a file; investigated everything that was alleged. Day by day we were just pounding away. We added other experts. We built the strength. We pushed forward silently like ducks on the water. Eventually the board voted the chair (controlling shareholder) off the board. A two-year effort to fire the CEO… It wasn't that people were blind and thought that everything was perfect but it was just that the numbers were good. I should also say they were blinded by, no blinded is too strong, influenced by that they had personal relationships with the CEO in business, I don't mean best buddies. Many of them had been in the same business and it was that sort of, Bonn homi, I guess I shouldn't call it that male bonding thing. The CEO was a very strong performer, the strategy was not in question, the risk management issues were all under control but he was a very controlling individual with his own management team and it was causing some turnover, people contemplating leaving, good people and I don’t care how good the CEO is, he can’t do it himself. Dealing with that….I was the only woman on the board, some of the board members, guys, didn’t really want to touch that, he’s performing, leave it alone. (It took six months to convince her fellow board members that they could help the CEO).We all agreed that we did want to try to keep this guy. We thought he could turnaround his style. It’s worked out extremely well. It was simply recognizing the problem, getting other directors to agree. I want three things. I want x, y, z. And I would like that recorded in the minutes that I am requesting that information. The CEO said well I'll call you off-line and tell me what you're looking for… and I said you can call me off-line and I am happy to go over that with you and that's what we did last year and people explained to me that we (the board) don't need this information. I want this information. So call me if you like to know the format of the information, but I want the information. Tough Issues Men One case I resigned from the board, no I didn't resign, I just didn't get reappointed at an annual meeting when I thought that the CEO was not capable. I discussed it with everybody including the CEO and the board was not prepared to take any action. Now mind you he was a major shareholder but nevertheless. I'd chaired the nominating and governance committee and normally performance of the CEO is the responsibility of the HR committee. During the meeting of the nominating and governance committee we pretty well all agreed that we had a problem with the CEO. So I was sent off to see my counterpart who was head of the HR and compensation committee and he said well look, I just got all these wonderful surveys in about the CEO from the board, this guy walks on air….. so what can I do about it. I said leave it with me, I'll get back to you. In the course of the next six months it evolved that the CEO decided to retire. I don't think he even realized he was being pushed out A guy that I knew, trusted and he was smart successful and I explained the situation we were in, and I said we've got a management group here who's going to take this into the end zone and we've got $40 million in it right now, and it's worth nothing and we could have $100 million in it and it would be worth nothing. We need to stop the spending and stop the bleeding. We can't because the dynamics at the top are such that we need someone from the outside to tell them. I spent some time with the CEO, told him we needed a third-party view of this, and he was kind of thinking that the third-party guy would kind of give him a worstcase of scale it down and keep going. It almost didn't happen because he negotiated, he really didn't want to pay this guy anything to do this report. I went back and said don't argue about this chicken shit. The consultant went through and said shut it down as fast as you can. The board had that information. The CEO didn't resist at this point. There's a struggle at that board to make that multinational corporation and the management be more respectful of the duties of the board, particularly since it is a listed company. And there are moments when, that tension kind of rises. They have a definite idea of how to drive the company. It has taken them a while to recognize the value of being inclusive on specifications of domestic directors. There is value they can add by being involved and consulted. So I've gone through about a year of that. I see the balance tipping in favor of, okay right, we’ll be more consultative and more open and transparent with you. Again that is something that seems quite obvious, but gradually it has taken shape over 12 months, it's probably going to
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need another six months to get it working as it should. Yeah you wrote that question for me. I was a board member of XXX company. We had been approached by a company to buy it. The company was doing extremely well. So I went down to a meeting, and the chairman said we've got an offer to take the company over. I said well that's easy to answer we’re not for sale. Of course we’re not going to sell it. The chairman said well I think maybe we should. I said I don't know why and the chairman said well it's a big premium to the shareholders and I don't know if Canada is a big enough country to really compete. The other directors agreed with him. I don't care I said I don't think it should be sold. I will fight this sale. I don't agree with it. Well it's a lot easier if the board agrees. I had a lot of pressure on me but I said I don't care. It was sold and I was furious.
Mechanisms Supporting Championing Consistent with our expectations, when championing tough issues, women and men exhibited several similarities: (a) the exercise of personal agency (b) honorable intentions and (c) preparedness (although as noted above women, differentiated themselves with a particularly high level of preparation) when championing difficult issues. Differences were also apparent. Women exhibited (b) courage and (c) mindfulness (the ability to be consciously aware of self while at the same time being very aware of what is going on (Boyatzis, 2005). Men on the other hand were less reflective, using and relying on their (a) expertise and a sense of (b) legitimacy to put forward their opinion. These mechanisms are discussed in detail below. Courage. The nuances between the sexes may appear insignificant but the implications are important in understanding the impetus of both groups to champion difficult issues. Some women spoke about the respect that they had earned on the board which provided the courage to speak up. These women evidenced notable courage in the face of adversity. A woman dealing with a problematic CEO style, was rebuffed by her fellow independents because they were afraid he would leave the company. Despite knowing that if he did, she would be the “fall guy”, she persisted at significant personal and professional risk. For men it appeared not to be about courage, per se, but their inherent right to voice their opinion to do the right thing. The only male member that spoke of courage said “If I don’t 25
agree with what’s been said and mine is the minority view then I have to have the courage to put it on the table. So you feel a hell of a lot better that you put it on the table and everyone disagreed, than you would if you are flying back on the plane and wondering if I put that on the table, could I have changed the direction that the board went in today. You can no longer afford to say, I wonder if.” Figure 7 illustrates examples of courage. FIGURE 7: Courage Interviewees W04 W05 W05 W06
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Courage It was difficult and I felt very exposed. They wouldn't listen to me and I said to myself I can not be a party to this and I left the board. Have the courage to stand on your own and you can't be held captive to the CEO. So they said it and I'm sure everyone was aghast, absolutely aghast. Nobody said anything and everyone carried on …. no one made one comment and I actually spoke up and said pardon me I just have to put this comment into the space, this makes me so angry I can hardly speak and this kind of behavior is totally unacceptable. I think some of these issues can be very tough for women if they are championing these issues where they are getting pushed back on, disagreeing….it’s just tougher to communicate in a room full of guys. It's a question of personality, well some people could never be independent in their mind because they feel secure when they go with the group, because there is a question of being secure.
Mindfulness. Women talked about intuition, insight and evidenced a mindfulness about what was going on around them (Boyatzis, 2005) in Figure 8. FIGURE 8: Mindfulness Interviewee W03
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Mindfulness But sometimes its just, you know, what did you think about, it will be a discussion, what did you think about what…what was said there…or did that feel a little funny to you or did…did you think there was something more behind that….. and sometimes you, you’ve got that sort of inner voice saying: hmm I’m not sure about that, but nobody else has said anything about that. Do the homework and have the antenna up for the things that don't look right, raise them and pull the threads that may unravel something. It makes me mad they couldn't see what I saw. I had one board member say to me how do you get to your conclusions. You're always right. Now, I listen more carefully. In the end you get there. Somehow I've learned it's okay that I speak out. Intuitively I know that. Women are more intuitive. They are not linear thinkers like men. Men think through an issue step by step by step. Women are not like that. And so my judgment was, my intuition more than judgment, and I guess someone once said that intuition is just an articulated experience so whatever it was, my sense was that I felt I was seeing signs that the CEO at the time was doing things that were putting the company at risk for the shareholders.
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Expertise. Men’s expertise, steeped in their experience, appeared to be what prompted them to take on an issue in the boardroom. Figure 9 illustrates examples of expertise. FIGURE 9: Expertise Interviewee M02 M03 M05 M07 M11
Expertise Well I don't know, I think it comes with experience. I really don't think there is anything hard about toughing it out. The reason I have a significant stake is because I understand the business, I think I can add some value and I think I can change the outcome for my investment. Great weight is given to independent directors on who are perceived by their colleagues as having knowledge and depth and judgment in the area…. their expertise… I'm a lawyer, when an issue comes up on a board that I'm on that involves legal judgments, they'll give more weight to what I say. If so and so says that, we had better send this back to the drawing board. As it turned out over a couple of months everybody gets educated, maybe it's not as bad as you thought it was, he eventually votes for it and we made the acquisition.
Legitimacy. Men also used the right to their opinion and their legitimacy in the boardroom to champion issues. Figure 10 provides examples of legitimacy. FIGURE 10: Legitimacy Interviewee M03 M05 M07 M08 M09 M11
Legitimacy I don't think anyone thought I did anything that was different from what they thought I would do. I did not do it to become a personal champion. If anything I did it to sort of coalesce the energy. I would just find it incredible that somebody would have a difficult issue and not confront it. An independent director should be able to make his or her point without worrying whether this is going to kill him with this group. I have been on boards… the personalities are fairly strong and if somebody disagrees with something they're not usually very bashful about it and they don't follow the herd. You take my advice or if you don't want it, I’ll just move on somewhere else. If you are viewed as a good board member and you know who they are, they get listened to. The people that talk all the time, their views don't matter very much. You ignore them.
Engagement through the Champion Process It was clear from the men’s descriptions that there was an acceptable code of behavior at the board, a sub-text operating that women could sense but couldn’t articulate. As a consequence, women pursued their issue persistently, were not easily dissuaded and maintained their resilience throughout a sometimes protracted and uncomfortable 27
engagement and negotiation process. Where women spoke of persistence, men spoke mostly of persuasion and consultation. The difference in engagement styles was stark: women prepared to “rock the boat” if necessary and men preferring not to. Each of the components of the engagement process is addressed below for both women and men. Structure of engagement – women. Three factors appeared at work here: (a) maieutic inquiry as a way to develop a sound fact base and logical argument, (b) a fairly strict adherence to board structure, with limited off-line engagement with counterparts and (c) sheer persistence, resilience and certitude. Maieutic inquiry. Women appeared to use maieutic inquiry in the toughest of cases to engage the group and to tease out the facts through exploratory questioning, which propelled the group to greater understanding of the problem. The evidence, based on the facts and a logical non-emotional argument, helped women engage the men at the table and facilitate issue resolution.
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FIGURE 11: Maieutic Inquiry Interviewee W01
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Maieutic Inquiry I'll think back to an earlier one when I wasn't in favor of development in a new business area. I couldn't tell whether the other board members were or not. So I actually posed a question instead of give my view which was addressed to the core business. I was really trying to say in a different way, I don't agree with leaving our core business. It's risky. I don't see where it's taking us. I posed it as a question so that they could educate me (smile). I didn't think I needed the education but that's the way for them not to think what is she asking??? What is she talking about???. Maybe that was sucking up but…. We turned it down. Almost taking a questioning approach. You know, how would it look if we were offside with market practices at the AGM and we have to explain it. What is it, what would be the compelling argument, that would lead us to do this and how would we describe it and that really stopped them in their tracts…….getting men to pay attention sometimes is if you have a really solid, fact based, and you know, rather than hitting them over the head and getting emotional, you just present the facts of your case and then say, tell me how you would…you know, make a decision that’s entirely different to this set of facts I tried to have an evidence base as much as I could. In the case of the CEO, the CEO lied about X. He said he had done such and such a thing and we found out he did it after he had said he'd already done it. The evidence was mounting. Just very logical in walking them through it You say you agree with most things, you like this, you like that, and that you are disappointed that this is not clear enough and you would like to be more informed on something. Things like that…..
Structure of engagement with limited off-line-women. Women in this study generally followed proper board protocol. Women and men both suggested that the adherence to protocol may explain why women normally didn’t get involved in off-line discussions as did the men. Informal off-line discussions were used sparingly by many women in this study. The dearth of women on corporate boards was one explanation. Consequently, the women sometimes felt that they were less “in the know” than the men. One senior male board member proffered that women were less comfortable with off-line informal discussions and attributed this to their minority status. The only outlier on this issue among the female interviewees said that gender was not the issue and it was her experience that men would call her with a crisis item or to vent.
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FIGURE 12: Structure of Engagement with Limited Off-Line- Women Interviewee W10 W09 W04 W06 W05
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Structure of Engagement with Limited Off-Line- Women Yes sometimes I have the feeling that maybe there were discussions like this, CEO with the chair of the human resources committee. They would meet maybe before a meeting and they would share information and all of a sudden you would realize that the chair knew and you didn't know. Women tend to follow proper protocol I want to make sure I go through the chair as a board member and say I'm asking for this to be put on the table and here's why. If women want to get stuff done that's what they have to do (have off-line discussions). It is not going to change. It is not going to change to be what women want. There are not enough women. It’s about trust. Men are more direct. Women won’t do it (off-line). It’s important to pick the best source of information. If offline is getting information then, just getting more knowledgeable. Absolutely no problem. Some discussion about something important in the life of the organization and is not shared with everybody, I have a huge issue with. And that happens. If you find out, I’ve raised it and just say I didn’t know that. That’s what happened with the evolution of Executive Committees. They were a hot bed for those in the know vs. those that were not, the inner sanctum. How do you discharge your fiduciary responsibilities, if you didn’t know everything that everybody else did? In most cases, if I was talking to another board member we would both agree to talk to the chair of the board who would then talk to the CEO. Occasionally that doesn't happen but I think that would be the better process. People get too informal and that's when lines start to break down and then everyone's talking to the CEO and that's not a good thing at all.
Persistence and resilience. Counter to popular literature that suggests that a maledominated culture (such as a corporate board) makes it difficult for women to gain authority (Eagly, 2007 citing Alvesson & Billing, 1992; Lyness & Thompson, 2000; Silvestri, 2003; Wajeman, 1998) the women directors interviewed were not intimidated, and went back at the problem again and again. Figure 13 outlines examples of their experiences.
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FIGURE 13: Persistence and Resilience Interviewee
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Persistence and Resilience Every time we talked compensation, I already knew that it was going to be a battle because the CEO would have everybody, especially the chair, he got the chair all revved up…. that we were being unfair, before a meeting. So I, I always got prepared for ….you know, here we go again. But it never entirely went away…or you get to the next issue, about benefits or something. Round two …… As chair of that committee with shareholders, it’s not right. So I think that’s…that was the persistence factor. I think I showed I was right but it doesn't matter now who's right and who's wrong but rather how are we reacting to the circumstances that that has created. I'm not sure whether I have been a little bit isolated and ostracized because everyone knows that I didn't agree with the particular decision that they went ahead with and are now implementing. I don't know how voting no will impact my status on the board, I just don't know what my status is on the board. Part of the follow-on is the reason I called the board chair last week was to say now that this is unfolding, here's something I think we could do to fix this and I want the chance to talk about this in camera as a board. I am afraid that this is being shoved under the rug and I want to talk about it. Being tenacious, being logical and passionate about it (that we could fix the problem) Certainly we had some discussions, like I said, they just didn’t want to do anything and I had to keep pushing, and pushing and pushing. Probably 6 months before I got them completely on board. But there is a lot of (personal) risk because when women think something needs to be raised, they raise it and won't let it go. That's what kept me going was that I truly believed that I have some judgment issues here and we need to explore them because they could put the shareholders at risk. It took me three and half to four years to get the CEO fired. I felt passionate about it. I had absolute conviction that this was the right thing to do.
Structure of engagement – men. Men in this study appeared to use three measures to engage the board: (a) persuasion, (b) working within the structure of the board supplemented by fairly extensive off-line and (c) deference to their influential colleagues to maintain the collegiality of the board environment. Persuasion. Men did not talk about their persistence at the board but rather persuasion, noting that tackling difficult issues must be done sensitively and quietly. Other comments included delicacy of delivery, non-confrontation and civil frankness. Women seemed almost amused by the fact that men were so guarded in their discussions at the board table. When one woman suggested they send their chair for training on the role of the board, her fellow male directors were astonished “Oh no, he’ll be offended”. One woman director in a two year effort to fire the CEO, was surprised at how civil the discussions had been, concluding “it has to do with familiarity and all that stuff but that’s not your job on the 31
board”. Men, the women observed, are preoccupied with civility: “…they are careful, they are careful how they say it… (I) don’t know why they are being so careful”. Figure 14 illustrates persuasion. FIGURE 14: Persuasion Interview M02 M04
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Persuasion Sometimes you have to “tough it” and hang in, you just can't walk away when it's happening but generally you can do it with, as I say emotional, intelligence, the soft skills. If you push too hard it's perceived as a threat or disruptive and now you've impacted the collegiality of the board and the board can't function if it's not collegial. It can't do its real job. This is not to say that there aren't some issues that are difficult…that it's better that you deal with it diplomatically, worded carefully or sensitively. There's no use in being very bullish about it. But dealing with something sensitively does not mean that you are avoiding it or going with the flow. It just means that you're being careful that in the process of trying to help that you don't create more damage. If I do feel very strongly I'll do one of two things, I go to the board and say we should fire the CEO because what the CEOs doing is wrong. Before that I would say, Mr./ Mrs. CEO, I know you're the CEO, but I have this issue and I know you disagree but I would like the board to consider this question/issue. As an independent director you're taking a huge responsibility, you are saying I support you as CEO but I think the corporation should do something different than what you are recommending. In that environment, to do that you are putting yourself out front and you might get the board to agree with you and you have a heavy, heavy burden of persuasion and then you may have a separate burden of persuasion if you asked the CEO to stay on after you've overruled him. You just have to do what's logical, you just have to be persuasive, build other allies on the board. The first step is understanding the views of other board members, canvassing in a sense, and if there's a strong leaning in one direction, say 8 out of 10, then it's talking to those other two and say come on Mr. X you're in the minority here. Why do you feel that way and try to be persuasive and hear them out. Not to bully them Let each side state their case clearly. Often when that happens the board will recognize that one of the cases is much stronger than the other. You get a kind of a movement towards one or the other position. A sensitive chair is exquisitely aware of the timing of when to bring the thing to a head. It looks like the board as a whole is moving to one position versus the other and then you try to do it gracefully so that the person on the wrong side of the issue doesn't feel he's been shortchanged.
Structure of engagement with fairly extensive off-line– men. Men appeared to be very consultative, both inside and outside the boardroom with other directors, often “testing” their thinking (mostly with male colleagues) in off-line discussions. Most admitted that they seldom had off-line discussions with women, although one outlier said “I don’t call the men because I know what they are thinking, I will call a woman (on the board) as I have no idea what she’s thinking. While confirming the reality of off-line, both men and women directors insisted that too much of it would render a board dysfunctional. However, in two female championed cases relating to CEOs, off-line between certain male directors and the CEO 32
created an added tension to deliberations, leading one woman to observe, “I was never quite sure how much of the discussion was staying in the tent but I wasn’t going to take that on while embroiled in this issue”. Another woman explained that when a male director off-lined with the CEO to warn him that the situation was serious, she was “as mad as hell.” She explained “He did it out of male loyalty.” Figure 15 below illustrates the male off-line experience. FIGURE 15: Structure of Engagement with Fairly Extensive Off-Line- Men Interviewee M01
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Structure of Engagement with Fairly Extensive Off-Line- Men Yes there is an awful lot of off-line but it's my experience it's not trying to gain some win, support for a position, it's more along the lines of, I have a problem with this issue, I don't fully understand it or maybe I do understand it but maybe before I go to the board and lay this all on the table, I really need to call someone. It varies from board to board. Some boards, there is a very broad discussion. Some boards handle it, at dinner before the board, get some wine opened, it is unstructured, you discuss various aspects of the business…… a place where you're not concerned about raising issues. A friendship will develop or I should say more a level of common interest or philosophy. It might be based around the company, a common view on the strategy and the way I use it, is I use other people as a sounding board. I call them and say here's what I think about this, discuss what you think about it. What I think I've tried to do is I've tried to talk to other outside directors informally and see if I could enlist their support for moving some agenda along. You want to make sure that you're not perceived to be undermining the esprit de corps of the group, so that it's done just in a way of mobilizing something to get it back on the table in front of everybody. Very important I find. Some issues are best handled that way- a little discussion before the meeting. See what the alignment is like and to the extent that I detect any delicate issue to do with a director or to do with the companies that a director can have some special advice on, then I speak to them off-line. This is not to say that you're holding a board meeting outside of a board meeting. I know people who think they are bad. I do not think they are bad. I think it's a good idea for directors with common interests to get together and chat, provided it is not for the intention of a revolt and that what emerges from the conversation is discussed at the board meeting. And it's a difficult line to walk.
Deference. Male directors defer to certain male colleagues in the normal course of decision making at the board. It appears to parallel playing to the strengths of the team; you tend to defer to your strongest players and bench the weaker ones. Deference appears to be a phenomenon at the board that creates a sub-text generally exclusionary of woman. Figure 16 provides examples of deference.
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FIGURE 16: Deference Interviewee M02 M03
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Deference When the chairmen of these two committees and all the members of the governance committee thought this way, there wasn't anyone who objected. There were no objections. And many boards don't want to be confrontational and are willing to say, he must be right. There is definitely a danger when people with strong views and are more articulate and are into the particular issue, to dominate the board and the other directors don't weigh in. On a really, really critical issue that's not likely to happen. On issues that are middle level where it can go either way, sure strong board members may dominate the discussion. Just remember that management recommendations are the starting point….. the really, really tough issues from my experience are where management are disqualified due to their clear interest,…… at the threshold of a tough issue, you have to address management conflict, There are always good people, better speakers, have the logic, that can influence other people to your way of thinking. That happens on boards. I've never seen a situation where there was a dissenting vote. At the end of the day everybody agrees to go along with it. If he thinks that we better be cautious or it's a very good thing based on their knowledge. We should go along with it.
Influencers (mediating variables). Four key conditions impacted the engagement process for both genders and determined the ultimate success of the championing process. These include (a) trust/distrust; influence/no influence; inclusion /exclusion and cohesion/no cohesion. All four variables are consistent with the findings of the preliminary interviews and model. The gender difference which was apparent, however, related to the apparently stronger emphasis of influence for men and a similar importance of inclusion/exclusion for women. The softer tone of persuasion, the propensity for off-line discussions and the presence of deference in the board make it reasonable that influence would have a significant impact on the championing process for men. For women, not being part of the dominant male culture makes the issue of inclusion/exclusion a real issue when pushing the group to deal with a tough issue. Time to develop consensus for the tough. Many of the “tough issues” stories outlined in Figure 6 above involved a significant amount of time to successfully resolve the issue. It was important for these champions to take the time to permit their fellow board
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members to become comfortable with the issue in order to reach consensus as a team. This finding is very consistent with the analogy of the incubator in the original model. Results of efforts. The findings for outcomes were consistent with the original model: the boards became stronger and the successful champion earned greater respect within the group. Four directors (three men and one woman) in this study did leave boards where the issue they were championing was unsuccessful; convinced that the issues were important enough to advocate for and resign over. Other directors said they too would resign, if an issue was not properly resolved. DISCUSSION Directors who champion tough issues at the board table play an extremely valuable role in enriching boardroom deliberations to cultivate better decisions for the company. Significant collateral benefits for the board as a whole and the individual champion, result from having confronted and successfully resolved the difficult issue (Druskat, 2000). Why then would there be reluctance to take on tough issues? We believe that individual championing of tough issues still involves a significant level of personal and professional risk for the champion. It takes courage to challenge top management judgments and recommendations because the CEO and the top management team are valued for their expertise (Baysinger, Kosnik & Turk, 1991). This is true as well when challenging esteemed board colleagues. Championing becomes particularly arduous if the advocate is in the minority on an issue and doubly problematic, if he/she is a minority – namely, women (Kanter 1993). So while our findings suggest the board environment is more receptive to entertaining difficult issues than in the past, (salubrious news for shareholders), it takes someone with great fortitude to make sure the tough issue gets raised. Our findings that 35
women were twice as likely as are men to raise tough issues suggests that women can have their voice heard (Gilligan, 1993). Many interviewees (men and women) attested to the need for a good board chair to foster a “discursive space” for the discussion of difficult issues (Fletcher, 1998). We agree with Sonnenfeld (2002) that absent that facilitator, the championship of tough issues will suffer. The males in our sample were confident that all important issues – not excluding tough ones – will find their way to the board table. There was comfort expressed that “someone” would come forward. However, many interviewees referenced examples of male directors failing to support – even advocating the abandonment of − tough issues raised by female colleagues. This is consistent with Eagly’s (2007: 5) argument that men tend to avoid problem solving until the problem is acute. Our findings evidence that had women not persevered, many difficult issues would not have been addressed at all or addressed only at a much later, more critical point. How do we reconcile this contradictory evidence? Davis and Thompson (1994) indicated that social norms may prevent directors from tackling difficult issues because of deference to the CEO and top management. But our findings suggest that deference goes beyond the CEO. Men appear to defer to one another based on the respective experience, expertise and influence of the board member. Westphal and Khanna (2003) found social norms in the boardroom are also used to control deviant behavior suggesting to us that the champions, who were successful with their tough issues, did not defer to the group norms and were not controlled by the group. Women in this study appeared to operate within a different context of the board room than the men. They raised issues that they strongly believed there was a need to raise, undeterred about their popularity. Men, contrarily, acknowledged that they would drop a controversial issue unless it was life threatening to the 36
company or if the CEO or board did not agree with it. Women, far less likely to exit than persist, seem willing to devote significant effort over longer periods of time to succeed in pushing tough issues. Bandura (1988a) proposed that the stronger the belief in one’s capabilities, the greater and more persistent will be the effort. In four separate cases reported in our interviews, women invested from six months to four years to accomplish what they had set out to do. Their resilience through this period was steeped in a belief that they were right (Bandura 1988a). Counter to popular literature that suggests that a male-dominated culture (such as a corporate board) makes it difficult for women to gain authority (Eagly, 2007 citing Alvesson & Billing, 1992; Lyness & Thompson, 2000; Silvestri, 2003; Wajeman, 1998) the women directors interviewed were not intimidated, and revisited a problem persistently until they succeeded. We note two further factors to explain each gender’s approach. Men use off-line discussions with fellow board members more extensively than do women. Off-line discussions for men occurred mostly “man to man” and typically, hinged on relationships established at or prior to the board. Consequently, when men were engaging the board on an issue, they may have had a beforehand “read of the room”. Women, however, generally did not. Where women engaged in off-line, it was generally with another female board member. But many of our female interviewees were the sole woman on their board. Women appeared to use mindfulness to fill their information gap. Instead of taking an aggressive stance, mindfulness of the dynamics in the room (Boyatzis, 2005), provided insight on how to approach the group. Secondly, our findings suggest that women respect the structure of the board and appear to prefer issues be dealt with directly at the table or
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through formal channels. The informality of off-line is not an issue for men who, appear to be more comfortable weaving between structured and unstructured environments. Our data indicates that women who have successfully championed a tough issue are respected and valued by their male colleagues. But despite their success, women do not appear to graduate from out-group to in-group status as a result, a finding that is not consistent with the literature (Turner, 1967). Women appear to maintain their liminal status, a betwixt and between operating zone, before, during and after the tough issue is concluded. Women’s stories suggest they do not operate within the same sub-text as their alpha male colleagues. Men are well socialized within the in-group evidenced by their emphasis on carefulness, sensitivity and “doing it quietly” so as not to “rock the boat”. Male relationships at the board are generally well-established and often, long standing. Men understand that to be “benched” on an issue may be good for the team, to maintain the collegiality needed to keep the board functional. Women resist being “benched” if it is an issue that they care about and if they believe can be fixed. Men may prefer to have the vote go their way but generally are prepared to go with group consensus. Consistent with Scully and Meyerson (1995), however, women, maintained resilience over time, until they had enough evidence to convince the board (within the board structure) to solve the problem. Women and men believed that working to consensus was a positive objective for the board. We propose the reason that women worked for so long and hard to successfully resolve a tough issue was because they knew that consensus was good for the group. They had to get the group comfortable enough with the issue to reach consensus. A split vote would be bad for the issue and bad for the board. All the women we interviewed were very senior. Their prior experiences in male-dominated cultures may have better equipped them to 38
tackle tough issues that male colleagues avoided due to male loyalty norms and deference dynamics. The essence of the comments of both genders was that women who get to the board today are very accomplished; they are chosen because they add value and expertise. Others argued that women take the risk to champion tough issues because they have less to lose than men. We disagree with this hypothesis. Senior corporate women generally have succeeded because they know how to exercise influence, balance persistence and resilience, and deliver results in adverse circumstances. Our data suggests that women directors are not unconcerned about the risks to their reputations; rather, they possess the necessary skills to take advantage of their liminal status, and thus maneuver successfully in the service of performing their agency responsibilities. The literature suggests that board selection processes disadvantage women (Hillman, Canella and Harris, 2002). Under the current “rules of the game” at the board, it is unlikely that women would be advantaged for being tough issues champions. Further research into the selection processes for boards that have embraced mainstream gender diversity (three or more women on the board) could offer some important insights compared to those that have not. It would be important to understand the profile of “tough issues” friendly boards if corporate governance is to move beyond, it’s improved, but current state. Figure 17 is the revised model as a result of this study.
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FIGURE 17: "Tough Issues" Championing Process Model
LIMITATIONS Several limitations inherent in this study suggest caution when generalizing our findings. Our sample size was small (22) and not randomly selected. All but two of the respondents were Canadian, indicating the research findings may have a strong cultural bias. Overall, our respondents were demographically representative of the established board population in Canada, but not necessarily of boards of entrepreneurial start-ups. Including more entrepreneurs in the study may have produced different results. Three of our interviews were not tape recorded and our post-interview recall and transcription of data may have been incomplete or faulty. Also, some of the experiences shared in the interviews dated beyond five years. Consequently, our results may be compromised by selective memory and recall bias.
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Some interviewees may have been reticent to provide a fulsome description when answering interview questions due to the sensitive and confidential nature of boardroom deliberations. This may have hampered the researcher’s understanding of the facts and/or the dynamics of the championing process. In addition, the complexity of the championing process included a large research agenda which directors may have found difficult to address in the allotted one hour interview time frame.
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