Demand Isn’t Factor Holding Women Back From Joining Boards

(Bloomberg) -- Sakie Fukushima remembers the novelty of being the only woman on Korn/Ferry International’s board of directors, which she joined in 1995. Ditto when she joined the Sony Corp., Kao Corp. and Benesse Corp. boards years later.

Even now, three years after Prime Minister Shinzo Abe made increasing women’s participation in the workplace a tenet of his prescription for reviving Japan’s fortunes, the proportion of females on Japanese boards has hardly budged -- at around the lowest in the developed world. While companies strive to follow Abe’s lead and narrow the gender gap, there’s a confluence of obstacles so deeply rooted in Japan that overcoming them may take another generation.

“It’s not politically correct anymore to oppose putting women on corporate boards, even in Japan,” said Fukushima, 66, now a director of several companies including Bridgestone Corp. and Mitsubishi Corp. “Companies want to put women on their boards. Yet there are not enough candidates among women here, with the board experience needed.”

Though Japan doesn’t mandate that companies have a certain ratio of women on their boards, Abe’s government has revised the corporate governance code to require boards to include two members with no ties to the company. That is expected to help increase the number of women directors as companies are compelled to look beyond the few females in their executive ranks. Abe also has been urging all listed companies to appoint at least one woman to their boards.

A new law starting April 1 requires companies with more than 300 workers to publicly disclose data on the number and status of women they employ, including information about women in management.

Pressure from Abe’s government seems to be helping. The number of companies with female directors rose 70 percent in the latest fiscal year, to 392 from 230 a year earlier, among 1,933 Topix index members, according to data compiled by Bloomberg. The percentage of female members on all company boards in Japan rose to 2.7 percent from 1.7 percent from a year earlier, the data show.

In the past year, N Field Co., a health care provider, and Gourmet Kineya Co., a restaurant operator, are among companies that had the biggest increase in the number of women on their boards. N Field increased its women internal directors to three from one, and Gourmet Kineya added two external female directors.

Still, the prevalence of female directors puts Japan near the bottom of a global ranking of 39 developed economies by Deloitte last year. The world’s third-largest economy also ranks in the bottom third for gender participation on boards worldwide -- 101st among 145 countries, according to the World Economic Forum’s Global Gender Gap Report in 2015.

The lack of gender diversity may be costing shareholders. Fortune 500 companies that have at least three female directors achieved an average return on equity that was 4.8 percentage points higher than companies without any female board members, according a 2011 report by Catalyst.

“Diversity and inclusion is not just nice to have, but it is a business strategy that is imperative to any company or organization,” said Tsukiko Tsukahara, vice president of Catalyst Japan, who advises companies on diversity and inclusion.

The pipeline of female director-contenders is narrow because there’s so few women in leadership roles in business in Japan. Also, the structure of Japanese companies discourages executives from serving on other corporate boards -- limiting the avenues for women to gain experience as a director.

‘Small Pool’

“It’s not so much an issue of Japanese companies not wanting to appoint women to boards,” said Nick Benes, whose Tokyo-based Board Director Training Institute of Japan offers director training and corporate governance advice. “They’re dying to -- they want to look good and do this. But the main way they can do this is to look to outside directors -- and there’s only a small pool who are allowed to be on someone else’s board.”

That pool is largely made up of female lawyers, accountants, professors and other professionals. Benes said they’re qualified in their fields, but few candidates have significant management experience. Also, he’s concerned about the issue of “over-boarding,” both for men and women directors. “When you thought you could handle four or five positions, even three boards is too many when one gets in a crisis,” Benes said.

A related obstacle is that companies are often determined to promote the “best” candidates, rather than considering the benefits of a diverse management team that might be achieved with “next-to-best or better female talent,” said Keiko Hayashi, who leads diversity and inclusion at Deloitte Japan and is a member of the Japan Women’s Innovative Network.

Working Moms

Another challenge is convincing working Japanese women -- especially those with families doing the bulk of the child- raising -- that being on a board isn’t just another headache, said Cindy Yoshiko Shirata, 63, an accounting professor who is an outside auditor of DIC Corp. and a board member of PCA Corp. and Win Partners Co. “Most women here say they don’t want to do it,” she said. “It’s added pressure.”

Significant changes will probably take another five to 10 years, said Emiko Magoshi, 63, a management professor who serves on Hitatchi Transport System Ltd.’s board and became a director this month of AXA Life Insurance.

Women, she said, need to become part of the solution. “The minute that an offer comes to you, grab it and change the way work is done,” Magoshi said.

That’s just what Fukushima did. She was a top performer in Asia for Korn/Ferry in 1995. When asked to join the board, she said yes right away.

When the company went public in the U.S. in 1999 -- she got to ring the bell on the New York Stock Exchange to mark the occasion -- most of the other internal board members stepped down, yet the company’s head asked her to stay on. Fukushima said she’d serve another term, which turned into a total of 12 years. From that came invitations to join other boards.

The Only Woman

“For a while I was the only woman,” on the Korn/Ferry board, she said, “yet that didn’t stop me from participating. After a while, they see you as a board member, not as a woman member.”

Fukushima said she knows Japan lags other countries yet remains optimistic, saying it will take more time -- maybe with the next generation of women managers -- for there to be a real shift in Japan. “Once one company changes and becomes successful and produces results, everyone follows -- and pretty quickly.”

--With assistance from Isabel Reynolds.

To contact the reporters on this story: Jodi Schneider in Tokyo at jschneider50@bloomberg.net; Kathleen Chu in Tokyo at kchu2@bloomberg.net To contact the editors responsible for this story: Brett Miller at bmiller30@bloomberg.net Jason Gale, Aki Ito