Diversity on Boards: Smart Business Lisa Levey Senior Director, Advisory Services September 22, 2005

© Catalyst Agenda n About Catalyst n Business Case for Diversity n Women In Leadership n Board Placement n What Women Can Do n What Leaders Can Do

© Catalyst Catalyst Vision A world that supports and encourages every woman in her career aspirations and places no limits on where her skills and energy can take her

© Catalyst About Catalyst n Advancing women in business since 1963 –Research –Advisory Services –Membership –Awards

© Catalyst About Catalyst – Sample of Members Alcoa, Inc. Alcan Inc. American Express Company Bell Canada Enterprises Best Buy Co., Inc. Booz Allen Hamilton, Inc. Cisco Systems ConAgra Foods, Inc. Dell Inc. Deloitte & Touche Deutsche Bank Fannie Mae General Electric General Motors Harley Davidson IBM Corporation Johnson & Johnson J.P. Morgan Chase & Co. Kraft Foods Inc. Limited Brands, Inc. Marriott International McKinsey & Co. Microsoft Corporation Motorola Nextel Communications, Inc. Nordstrom, Inc. PepsiCo, Inc. Pfizer Inc. Raytheon Company Scotiabank Sempra Energy Shell Oil The Goldman Sachs Group, Inc. The Home Depot The Procter and Gamble Company TIAA-CREF Time Warner TransCanada Pipelines Limited Unilever Xerox Corporation

© Catalyst “Business Case” for Diversity According to 107 top U.S. companies and firms : n Competitive advantage (89%) n Improve retention (59%) n Improve marketing/sales results (46%) n Improve recruitment (46%) n Enhance creativity and innovation (41%) n Respond to legal requirements (7%)

© Catalyst “The Bottom Line”  Fortune 500 companies between 1996 and 2000  Financial data – ROE and TRS – from Compustat (Standard & Poor’s)  Catalyst’s Census of Corporate Officers and Top Earners  Included companies that had 4 out of 5 years of data

© Catalyst Source: Catalyst, The Bottom Line: Connecting Corporate Performance and Gender Diversity, 2004 Gender Diversity and The Bottom Line 34% or 32.4 Percentage points Average TRS In terms of both ROE and TRS, on average, top-quartile companies financially outperformed bottom-quartile companies Average ROE 35% or 4.6 percentage points

© Catalyst Source: 2002 Creating a Business Case for Diversity, Part of the Catalyst Making Change Series Building The Business Case Elements of the Business Case Increase Revenues Reduce Costs Get the most from your people  Attracting new customers; finding new markets  Building customer loyalty; retaining existing business  Keeping your growth strategy from running out of fuel  Eliminating differential turnover across demographic groups How can we improve bottom-line results? Increase Productivity  Tapping into top talent  Motivating all employees to do their personal best  Maximize the value of diverse teams – innovation, creativity, and quality

© Catalyst Catalyst Pyramid U.S. Canada

© Catalyst Catalyst Census of Women Board Directors Percentage of board seats held by women: Source: Catalyst Census of Women Board Directors U.S.Canada

© Catalyst Percent of Board Seats Held by Women in top 500 Companies *Source: 2003 Catalyst Census of Women Board Directors U.S. Canada

© Catalyst Number of U.S. Companies with Women Directors, Zero Women One Woman Two or more Women *Source: 2003 Catalyst Census of Women Board Directors

© Catalyst What’s the Problem? n Not a pipeline issue! n Women face unique barriers –Lack of access to informal networks –Lack of mentoring –Stereotypes about capabilities and preferences –Work-life challenges n The good news – CEOs increasingly see diversity as their responsibility to drive change

© Catalyst The Changing Landscape What Some Believe n CEO essential n Not enough women at high enough level n No way to find them n A woman would be too different n One is enough! What Others Realize n Enough existing CEO representation n Male CEOs need to mind own company n Add other qualifications to talent base n Reflect stakeholders

© Catalyst Impact of Sarbanes-Oxley n Nominating committees become the norm n Fewer sitting CEOs available n Changing profile of the ideal candidate n Board independence and board diversity go hand-in-hand n Look beyond the “usual suspects”

© Catalyst The Process - How It Happens Referrals, referrals, referrals!! n Exposure to qualified women (and men!) n CEOs or nominating committee n Search firms n Alliance for Board Diversity

© Catalyst Desirable Profile(s) For F1000 n Line management positions with profit and loss responsibility n Financial expertise; other deep functional expertise; relevant industry-specific knowledge n Powerful connections n International experience a plus, but rarely the only requirement n “Soft characteristics” equally important

© Catalyst What Can Women Do? n Have a game plan n Obtain leadership experience n Get line/operating experience n Be well-grounded in finance/business n Be visible – seek high visibility assignments n Ask for what you want

© Catalyst Why Bother? n Contribute at highest decision-making level n Influence and change the world n Broaden general business knowledge n Develop new skills/areas of expertise to apply to own career; expand professional network n Provides prestige and remuneration n Act as role models and beacons of hope for other women

© Catalyst What Can Business Leaders Do? n Understand your role –Require a diverse slate –Be willing to take some risks –Be a voice of dissent –Assume women want to serve on boards –Refer women leaders that you know –Be vocal about the value of diversity in business

© Catalyst Conclusions n Diversity is a business imperative n Progress has been incremental but change is possible n Women face unique barriers that are not obvious to their male counterparts n The landscape for diversity in the boardroom is changing n Women and business leaders are both part of the solution