Many companies lack a key factor, which could stunt their competitiveness in future years. Diverse groups provide wider experience and outlook and make better decisions, but some companies fall short of having anything close to diversity on their boards of directors. Today's specific question: Where the heck are the ladies?
Fortunately for the sake of a more dynamic and robust marketplace, some shareholders are bringing the lack of female representation on boards of directors to the forefront. They're also trying to rally other shareholders into pushing for some positive change on the issue.
Behind the times
Despite its reputation as a cutting-edge retailer, Urban Outfitters (Nasdaq: URBN) hasn't set itself apart from the majority of companies with an old-fashioned, cookie-cutter approach to this situation. It has zero women on its board of directors.
Shareholder Calvert Asset Management has filed a resolution (co-sponsored by Connecticut Retirement Plans and Trust Funds) asking Urban Outfitters to rectify this problem, dubbing the retailer a laggard on diversity measures.
These proponents point out that Urban Outfitters comes up short when compared to retail peers Abercrombie & Fitch (NYSE: ANF), Gap, Ross Stores, Nordstrom (NYSE: JWN), and Limited Brands (NYSE: LTD).
Generally speaking, retailers are among the best companies when it comes to board diversity. Almost three-quarters of retail companies have at least one female director. For a retailer that's often ahead of the curve fashion-wise, Urban Outfitters is way behind the times on this issue.
Maybe the biggest bummer about the lack of women on Urban Outfitters' board is that it doesn't really make sense. After all, females make up a major portion of this company's customers, particularly connected to its Anthropologie concept. It's perfectly logical that Urban Outfitters' board should include at least some representation of the demographic the company so strongly markets its products to.
The proposal isn't draconian in its demands. It simply asks the company to include women in the pool of candidates from which board nominees are chosen, publicly commit itself to an inclusive policy, and report its diversity efforts to shareholders. It doesn't sound that difficult, does it?
The deadline for shareholders to vote on the proposal is May 17, when Urban Outfitters holds its annual meeting.
Losing competitive advantage
Urban Outfitters isn't alone in this glaring deficiency, of course. Recent data well publicized by The Atlantic spotlighted the fact that women hold only 12% of board seats at major U.S. public companies. Of 4,000 public companies, only one could boast a board with a female majority. That's pretty pathetic.
There's ample data supporting the idea that female attributes are good for business (and investment returns, for that matter). My Foolish colleague LouAnn Lofton has penned a book outlining the benefits of investing like a girl. The book launches in early June; the timing is impeccable, given the increasing attention being directed at this undervalued competitive advantage.
Meanwhile, a 2010 McKinsey study revealed that corporations whose boards of directors included the most women beat out other companies in terms of outperformance on important metrics. These companies outperformed those with less diverse boards by 41% in terms of return on equity and by 56% in terms of operating results.
All is not lost, though. A recent post by Harvard Business Review pointed out that the absence of women in corporate settings is increasingly perceived in a negative light. A Financial Times editorial recently said a lack of women on management teams "sends negative signals of a conservative mind-set, an inability to look beyond a tried circle of directors and a proneness to damaging group-think."
Author Sylvia Ann Hewitt also pointed out that major companies like American Express (NYSE: AXP), Cisco (Nasdaq: CSCO), and Intel (Nasdaq: INTC) are trying to spearhead more proactive approaches to groom high-performing female employees for leadership positions.
Better returns at risk
Urban Outfitters is one of my all-time favorite companies; I've been a shareholder for many years. However, no company is perfect, and Urban Outfitters could likely have an even brighter future if it recognized the importance of a diverse, robust board of directors and worked harder to compose one.
Could the companies you own use a similar shot of estrogen? Given the data about how few female directors there are, it's quite possible. You might want to check out your company's board members in the latest proxy statement and consider whether it could be falling behind on this key element of building a more robust and dynamic business environment. Better returns could be at risk.
Check back at Fool.com every Wednesday and Friday for Alyce Lomax's columns on ESG (Environmental, Social, and Governance) topics.
