10 thoughts on “Executive pay too high? Get more women executives, that’ll fix it.

  1. Well, I think he said putting more women on the boards that vote on executive pay increases would fix it. At least, from what is in the article, what he said was: “At the moment I think there is too much of a closed circle of people made available to be non-executives. By opening this up, by increasing the number of women in our boards – I think that would have a beneficial effect.”

  2. Although the passage you quote does not actually make it clear that your reading is right. I should note also that nothing I *wrote* in fact conflicts with your reading, even though that is not the way I took Cameron’s comments. And if that is what he meant then it becomes a dubious claim about women being fairer, and remains worthy of criticism.

  3. In response to Jender at 6:30 am: Since Cameron spoke of opening up the circle of people considered to be _non-executive_ [board members], I guess I thought it was noteworthy that this was his way of “opening up” the circle. That is, that he was _not_ going all the way to saying there should be more women executives. This seems to me a pattern: let’s let more women in when diversity might help with a problem, but only in certain roles: in this case, as non-executives. The fact that he specified “non-executive” struck me.

    ( Maybe you misunderstood me: I wasn’t sticking up for Cameron, I was pointing out that he was not in fact suggesting more women executives.)

  4. I agree with anonymous that Cameron was talking (at least in passing) about increasing the representation of women non-executive directors, not women executives. Some members of boards of directors are also executives (i.e. senior officers of the company), but at least at publicly traded companies the directors who decide executive compensation at Company X generally aren’t simultaneously executives of Company X, in order to avoid the appearance of a conflict of interest. Rather, it’s generally independent non-executive directors who decide compensation for the company’s executives.

    On the other hand, most of the independent directors sitting on corporate boards are actually current or retired successful executives of *other* companies (that’s the typical credential that gets you an independent board appointment for a different company), so to increase the overall number of non-executive women board members might actually entail increasing the overall number of women executives across the corporate world – at least until having achieved executive success *somewhere* is no longer perceived as being quite so important a credential for becoming an independent non-executive director at a different company.

    Some of the confusion may arise from the fact that many (mostly non-business) people use “executive” in a broad sense to mean anyone in a senior position of power – so that they think the term must apply to members of a company’s board of directors (which is ultimately responsible for overseeing the president and other executive officers of the company and for directing the company’s affairs). But that’s not technically correct.

    It’s not exactly clear by what mechanism Cameron thinks better representation of women on corporate boards will rein in executive pay, though. I agree with Jender that some dubious theories spring to mind, but Cameron hasn’t really explained.

  5. Nemo, I think most of the points you made are right. I haven’t heard Cameron explain what mechanism he thinks will improve matters. I think he was just referring to a suggestion made in an earlier study, though he changed it a bit.

    I meant to post a link of a place to which people who are not executives can be considered to serve on boards of companies, so my comment “Here’s how to help!” was meant half-seriously; they are supposed to be chosen by an open and fair competition.

    I cannot seem to find that link now, but here is an interesting/inspiring/frustrating excerpt from an article on how to become a non-executive director that talks specifically about female non-executive board members:

    “Female non-execs.

    According to a Deloitte report, among the top 350 firms, women make up only 3% of executive directors and 8% of non-executives. The Female FTSE Report 2004 states that ‘Overall companies with women directors scored significantly higher (on corporate governance indicators) than companies with all male boards….There is clear evidence that better managed companies are those with gender diversity in their boardrooms’. So, why are there not more women? Well why does the sun shine? There are plenty of lobbyists and compelling business cases out there for women to take on more senior roles in business and qualify for board appointments as either Exec or Non-Exec Directors but the old boy network and negative gender stereotypes linked to whether one has ovaries or not still prevail unfortunately. The tide will turn eventually and don’t stop clamouring for the barriers to be broken down but be prepared for a tough ride. Try the Public Sector is our advice.” (from: http://www.newlifenetwork.co.uk/non-executive-directorships-c86.html )

    And here is a Huffpost essay about it: http://www.huffingtonpost.com/lucy-p-marcus/the-role-of-nonexecutive-_b_798944.html

  6. Anonymous, I like the article about independent directors. Of course, the woman who was writing there about her experiences as an independent director at one company also happens to be CEO of a different company.

    If a woman has managed to become a senior executive somewhere, she has already attained the main credential to be appointed as either an executive director (on the board of the company where she already works) or as a non-executive / independent director (on the board of a company other than the one where she works). The most difficult bit is getting to that point.

    At a good-sized company, independent directorships are going to be staffed by conventionally successful people. What do I mean by this? Well, in my experience, the people who are sought out for independent directorships are people who are currently (or were recently) running successful businesses; retired high-ranking politicians, diplomats and military officers; distinguished experts in some field arguably relevant to the company’s activity (such as a well-known professor of medicine being on the board of a healthcare company); and things like that. (The standards of distinction for independent directorship candidates are lower if we’re talking about the board of directors of a smaller company, of course.) It’s hard to imagine that practice changing much in the foreseeable future, though perhaps some headway could be made toward persuading shareholders to consider less traditional backgrounds in their independent director candidates.

    So I suspect the most reliable and durable way to attain increased representation of women non-executive directors in the boardroom is to keep working on achieving fair representation of women in all the various underlying pools from which candidates for non-executive directorships are typically drawn.

    What effect all this would have on executive pay (the initial topic) is anyone’s guess, but it would pretty clearly entail other benefits.

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