In this series of posts, I’ve been detailing some of the ways in which the gender undertones of the Yellen-versus-Summers-for-fed-chair debate resemble discussions we've heard about corporate board diversity. In this wrap-up post, I want to return to a theme I mentioned in my first post – the criteria that the Obama administration says will dictate the choice, which will not include gender, but will include the President’s comfort with the candidate, how well he believes he or she will do the job, and how successful the new chair will be in dealing with the market and with Wall Street.
But these criteria, depending as they do on subjective assessments, may not be separable from gender, which is rather the point made by some of Yellen’s supporters when they label Obama’s economic policy team a boy’s club. And this, at bottom, is part of the tension we have noted in the board diversity debate. In neither case –the fed chair nor the corporate boardroom -- is anyone arguing that more-qualified men should be passed over for less-qualified female candidates in the name of “diversity.” But in the contest for fed chair, at least, most seem to agree that both candidates are highly qualified for the job. (Though, as always, some believe one candidate is more capable than the other). As former Obama administration economist Jared Bernstein describes it: “It’s an embarrassment of riches. . . .He’s weighing who would do the best job at a sensitive time, and the differences here are nuanced.”
And those nuances are, I assume, what concern some of Yellen’s supporters, because they often involve the type of subjective criteria that our respondents sometimes refer to as “fit.” Do incumbent directors and the CEO click with the new candidate? Have any of them worked with him or her in prior positions and developed a relationship (or not)? And similarly, whom does the President (or his economic advisors) trust and feel comfortable with? Who does “the market” favor?
The tension here, it seems to me, is that these assessments may not be gender neutral, and yet at the same time are not irrelevant to the selection process. It really is important that a group work well together and have confidence in each other. It really does matter whether key constituencies have confidence in the selection. And separating proper from improper reasons for discomfort with a candidate is not always easy.
In the boardroom context, our respondents emphasized the importance of collegiality and consensus in the board’s interactions with the CEO. Indeed, this relationship is so important that many of our respondents characterized the role of the CEO in selecting board members as something approaching a veto power, despite recent corporate governance interventions that emphasize the board’s independence from the CEO.
As stated by one white female director:
A: And the way we did [director selection] is the CEO and I interviewed the candidates together . . . And I think if the CEO truly disliked the person we wouldn’t go forward because you don’t want to do that. You want good chemistry. You’ve got to be focused on the end game. What do you want to occur? Do you want to have better results than you would have had before? And say if you’ve got at the very beginning the CEO doesn’t like how someone combs their hair, you’re probably better off to go find someone else. But, if you’ve got the CEO trying to veto everything because it’s another strong CEO and they just don’t want to deal with the person, that’s a different scenario. (emphasis added)
Another white female director emphasized the same point:
Q: What role do the CEOs now play in board selection?
A: They’re in there, but they’re not the sole source any longer, in most companies that I’ve been engaged with. I think they’re still. . .
Q: Do they have a blackball?
A: Probably they could veto, yeah. I’ve not seen it happen, but yeah, I think so. But it’s not...Well, I should . . . It’s not that they choose the board members the way—in this clubby fashion that used to go on, but I think they all would like to. Well, their opinions count, but you need more opinions than just the CEO’s opinion. And I think that’s far more commonplace, even in smaller companies, than it used to be.
Perhaps not surprisingly, given these statements, nearly all of our respondents cite the "tone at the top" -- i.e. the CEO's commitment to a diverse board -- as the primary driver (or, in some cases, impediment to) board diversity.
That’s it on this topic for now. Thanks for reading!