Research: Only 10% of Joint Venture Board Members Are Women

The boards of public companies are watched carefully to see how they’re doing on gender parity and other measures of diversity. Joint venture boards get far less scrutiny — and it shows. According to our latest research, which covered more than 200 joint ventures across industries and geographies, only about 10 percent of JV directors are women. Compare that with the S&P 500 corporate boards, where 26 percent of directors are women. (That’s still a small number, but it’s been moving up.)

Why should we care? Well, for one thing, joint ventures are an increasingly important part of the economy. They make up a huge portion of several industries: natural resources, renewable energy, high tech, telecoms, aerospace and defense, health care, and airlines. And they’re critical to corporate innovation and future growth: Consider Google-Uber in autonomous vehicles, Starbucks-PepsiCo in ready-to-drink coffee, or the Amazon-JPMorgan Chase-Berkshire Hathaway platform in domestic health care.

But here’s the real reason we want to highlight this issue: The dearth of women in senior leadership and corporate board positions is often attributed to a “pipeline” problem, and a JV board is a great (but overlooked) place for women to develop and demonstrate leadership and governance skills. It can help to position them for the senior-most positions within a company or to serve on the boards of public companies.

A host of factors likely contribute to why so few women serve on JV boards. These boards face far less public exposure and are not subject to the quotas or disclosure requirements that have helped to encourage greater gender diversity on public company boards. They are also notoriously less rigorous about managing board composition. Because board size is often capped by the legal agreements, venture boards tend to be smaller than corporate boards (average size of 7.5 members, vs. 10.7 members, respectively) and therefore lack the flexibility to simply add additional members as a means to increase gender parity.

Additionally, JV directors are almost always shareholder appointees, with the director role often tied to certain positions or duties within the parent company, like accountability for a given P&L or line of business. Finally, independent directors are scarce on JV boards (only 20% of JVs have at least one independent board director), and other governance practices, such as term limits and other ways to refresh the board, are seldom used in the JV context. Thus, JV board composition is rarely tested holistically for a balanced mix of skills and attributes. As a result, while JV director turnover is high (the average JV director tenure is 2.9 years, versus 8.0 years among public company corporate directors), that churn is not leading to higher diversity.

At an individual industry level, JVs in certain sectors over- and under-perform on boardroom diversity. According to our latest benchmarking, only 7% of technology JV board directors are women. It’s 7% in oil and gas joint ventures, and 6% in chemicals joint ventures. Meanwhile, joint ventures in the health care/life sciences and financial services industries have the highest relative proportions of female directors – 19% and 18%, respectively. Health care and financial services are the only industries whose proportion of female JV board directors approaches the benchmarks for women in corporate board seats or C-suite executive positions.

The industries that have been most successful at placing women on their corporate boards, executive teams, and JV boards tend to be less male-dominated generally, with more women throughout the organizational levels. In addition, the relatively higher proportion of female directors on health care JV boards may be linked to the nature of the venture businesses. Many of today’s health care JVs were established to cope with or capitalize on massive, industry-wide disruption, including a changing regulatory and political landscape, the threat of disintermediation via new competitors, and other economic and demographic pressures. This means that the venture business models are often founded with an imperative to innovate; they draw heavily on elements of other industries like retail, hospitality, and technology. If diversity and innovation are foundational elements of these ventures, it is perhaps not surprising that these values are reflected in JV boardrooms. A similar case could be made for financial services ventures, or even those in renewable energy and power, which are the only other JV industry segments with proportions of female directors (18% and 10%, respectively) that meet or exceed the cross-industry JV board benchmark.

That said, it’s still worth noting that the higher incidence of women on these sectors’ JV boards exists despite the fact that most haven’t adopted best practices for refreshing the board and increasing diversity.

We believe that the rationale for greater corporate boardroom diversity is compelling and that it applies, as well, to JV boards. It may be even more important in that context, given JVs’ unique structure, risk profile, and track record of mixed performance. Various research studies have indicated that companies with female board directors have higher average operating profits, returns on equity, and price-to-book values; stronger average growth rates; and lower financial gearing ratios, compared to companies with all-male boards. More broadly, a Thomson Reuters global study of some 4,500 publicly listed companies showed that the boards with the highest diversity scores – in terms of gender and cultural diversity – outperformed peers for each of the prior five years on measures like return on equity, profit margins, and dividend yields.

Additionally, governance research has shown that when women serve on a company’s board, there is a 20% lower risk of bankruptcy or liquidation and a 40% drop in restatements of published financials. Research done at INSEAD suggests that women outperform men on seven of the top 10 leadership attributes, including team building and emotional intelligence – skills which are essential to effectively managing key stakeholder relationships. And, as  noted above, appointing women to JV boards expands women’s leadership and governance experience and professional networks, which, in turn, helps women compete on a more level playing field for top executive roles and corporate directorships.

Gender equality and sexual misconduct will continue to be of concern — and JV boardrooms are an under-acknowledged opportunity to address gender parity. With upside potential for ventures, shareholder companies, and women themselves, what’s the holdup?

Molly Farber is a Managing Director at Water Street Partners, an Ankura Company.

James Bamford is a senior managing director at Ankura, where he serves a global client base across industries on joint venture and partnership issues. He previously founded Water Street Partners and co-led the joint venture and alliance practice at McKinsey & Company.

David Ernst is a senior managing director at Ankura, where he works with clients across the globe, in all phases of the joint venture life cycle from deal making to restructuring and exit. He previously founded Water Street Partners and previously co-led the joint venture and alliance practice at McKinsey & Company.



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