Gender Diversity on Boards

By Jamie Ferguson, Vice President US and Latin America, Maxwell Drummond

The issue of diversity on Boards of Directors is an increasingly important topic in today’s global oil and gas landscape. Diversity can include ethnicity, gender and experience. By not having a diverse board or executive team, companies can seriously handicap their operations. Having a diversely well-rounded team allows companies to identify and navigate through the human, social, regulatory and political risks that the oil and gas industry constantly faces.

The issue of gender diversity varies greatly between the US and Europe. In February 2010, the US Securities and Exchange Commission enforced new Proxy Disclosure Enhancement Rules to make companies disclose how they considered diversity when choosing new board members. Several EU countries such as France, Italy, Spain and the Netherlands, have already adopted national quotas, but countries such as Britain and Sweden are strongly opposed to doing so. As such, the EU is pushing for legislation requiring that companies with 250+ employees or that earn more than €50m in revenues must report annually on the gender make up of their boards. If this legislation is enforced, failing to meet quotas would subject companies to administrative fines or to barring from state aid and contracts.

The PwC Insights from the Boardroom 2012 survey revealed that racial and gender diversity continue to receive some attention, with 22% and 25% of directors indicating they are “very important” characteristics of new director candidates. Directors at larger companies, (more than $5 billion in annual revenue), assign higher importance to adding racial and gender diversity than do those at smaller companies. Perhaps this is a result of shareholder pressure that tends to focus on larger companies first and then trickles down to smaller companies.

With several oil and gas companies lacking female board members, it is important to understand the importance of board diversity in the first place. A recent study by Credit Suisse found that the more diverse the board, the better the company performs. Diverse boards offer a better mix of leadership skills, access to a wider pool of talent, a better reflection of decision making customers/stakeholders, improved corporate governance and a higher risk aversion.

Executive search firms can play a direct role in aiding companies to diversify their boards. They must act as true consultancies and challenge leaders on the diversity of their boards. When executing board level searches, these consultants must ensure that diversity is addressed on candidate slates to include women as well as diversity in nationality and experience.

About the author
Jamie Ferguson joined Maxwell Drummond’s Aberdeen team in 2006 to focus on executive search in the energy sector. In 2007 he was promoted to General Manager in Aberdeen and in 2009 Jamie relocated to Houston as Vice President of Maxwell Drummond’s USA and Latin America business.

Maxwell Drummond International is a world leading retained search consultancy offering professional search services to clients in all sectors of the energy and natural resources industries.