Women as directors: the 'inside' story; Looking beyond the number of women serving as outside directors to the number serving as inside directors, a startling statistic emerges--only about 2.5% of all insiders are women.(BOARD DIVERSITY)

A FEW YEARS AGO, we examined the number of women serving as CEOs and board members for Fortune 500 companies during the 10-year period between 1987 and 1996. The number of women CEOs did not change during that period; only two women served in that role. However, the number of women serving as board members improved markedly, from 42.6% to 81.2% of Fortune 500 companies having women directors. For us, however, the more critical finding was the number of women serving as inside board members. This number declined from 11 in 1987 to 10 in 1996.

The issue, of course, was not the loss of one inside director; rather, the point was the startling lack of women's participation as insiders. At that time, the Fortune 500 would have had 1,500 or so corporate officers serving on their boards. Women, then, would have comprised an astonishingly low 0.6 of 1% of those board seats. Much more important, however, were the implications for the advancement of women into the executive suite. Specifically, women who have not enjoyed service as inside directors are very unlikely to become CEOs because they will not be considered as seasoned and able candidates, for two reasons.

First, the majority of successor CEOs are chosen from within the firm. In many ways this is exactly what effective succession planning is designed to accomplish. A successor--or several--is identified in advance of the incumbent's retirement, typically from among the executive ranks of the organization. Even when that is not the case, candidates for firms seeking an outside CEO will likely be drawn from the high-profile officers of other firms--CEOs, executive vice presidents, CFOs--who almost certainly will have served as inside directors. In this regard the issue for …