Shareholders, Regulators Increase Impetus to Change
By Maya Weber
Energy companies are facing external pressures to lift their female leadership numbers from institutional investors, activist shareholders, and even potential employees and customers. But a number of female executives interviewed said the internal drivers at their companies were stronger.
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“I think there is a desire to do that at the top of the house at BP because there is a deep belief that you get to better answers if you bring in different perspectives and voices, and that women have a very important perspective,” said Janet Weiss, president of BP Alaska.
“It’s the internal belief in better business outcomes that’s the stronger force. Are there external pressures? You betcha,” she adds.
Governments and regulators are increasingly watchful of companies that are lagging in female representation on corporate boards. Norway imposed a 40% quota on boards of listed companies more than a decade ago. A number of other European countries, including France, Italy, and Germany, have followed suit with varying quotas, some with more teeth than others. California imposed something similar in 2018. And gender pay gap disclosure in the UK, which started in 2018, has shed light on the issue of gender disparity in leadership positions, prompting some companies to address it.
Investors are also playing a role. State Street Global Advisors, one of the world’s largest asset managers, in 2017 threatened to vote against the full slate of board members for companies with all-male boards. Another large money manager, BlackRock, has said in proxy voting guidelines that it would expect to see at least two women directors on boards. The New York State Common Retirement Fund is among large pension funds warning of votes against directors on boards that lack diversity.
“The way that investors are standing up in terms of sustainability to the big corporations is quite vocal now, especially in the context of climate change,” noted Christina Verchere, CEO of Romanian integrated oil company OMV Petrom. “When you’re in that conversation about sustainability with this investor group, you are in a bigger conversation about societal issues, one of which is about gender.”
However, many female executives said the shift toward more gender-diverse leadership teams was primarily motivated from within. Anne Pramaggiore, senior executive vice president and CEO of Exelon Utilities, sees both external and internal factors as important. “Diversity and the tie to innovation is a very strong driver for business, and so I think that’s the internal impetus,” she said, noting the major transformation underway of the utility business model.
“The way that investors are standing up in terms of sustainability to the big corporations is quite vocal now, especially in the context of climate change.”
Investors are also paying attention, she said. “There’s no question about that. They make that quite clear.” And there’s society at large. “The discussion across our culture on diversity is a strong dialogue right now and businesses are part of that as well.”
Moreover, as a utility, her company faces questions about diversity in its ranks from state regulators. And utilities frequently cite a sense of responsibility to look like the people they serve.
For companies that already have women on their boards, the threat of being punished by investors is less of a worry. Patti Poppe, president and CEO of utility company CMS Energy, puts it this way: “As opposed to pressure because you’ll get in trouble if you don’t, it’s more of a belief that a diverse team makes better decisions. So it’s a desire to have a diverse team [versus] how hard it is to actually create that when there’s a limited pipeline pool,” she said.
At her company, 45% of board members are women, as are about 30% of its officers, she said.
Internal drivers often mentioned in interviews included:
- - A need to draw strong talent from more than 50% of the population;
- - Trust in consultant research findings that diverse teams help drive innovation, or that companies with diverse leadership have better performance; and
- - A need for a workforce that will match future customers.
Even as many CEOs strive to diversify because they think it’s the right thing to do, “I don’t think you can extricate the fact that there are a lot of these external pressures, and truly commercial pressures to be mindful of this and purposeful about this,” said Jennifer Rockwood, global power and utilities practice leader for recruiting firm Russell Reynolds.
That was particularly true for publicly traded companies, she said. Meanwhile, companies that sell directly to individuals may be more vulnerable to consumer reactions or social media campaigns.
Another source of momentum: some trade groups have urged CEOs of their member companies to sign pledges to advance diversity and inclusion.