Women are gaining more board seats in biotech, but real change is happening at a snail's pace
The number of women occupying board seats at 177 biotech companies that went public between 2012 and 2015 ticked up last year. But just barely, with one in 10 board seats occupied by a woman. And a new study examining the progress of seeing more women on biotech boards concludes that we can meet gender parity at this rate — but it won’t arrive until 2056.
The study comes from Karl Simpson, CEO of Liftstream, an executive search firm. Simpson made waves back in 2014 when he first highlighted just how rare it is for a woman to reach the top job in biotech. In this new look, he examined the reasons for what is still near glacial movement on this front, which comes a year after some controversial parties at JP Morgan helped bring the issue of gender diversity to the forefront.
There was a silver lining in the study. Simpson says that for the first time, more than half of the companies – 57.2% – surveyed had at least one woman on the board. But he goes on to note that the women who do wind up on boards are rarely offered the most powerful positions, indicating that there’s a degree of tokenism going on in light of some growing pressure to diversify boards.
One of the biggest problems, Simpson notes, is that the same male-dominated VC groups that staff private biotech boards still command a big presence well after an IPO, denying one opportunity for finding a shorter path to putting more women in key positions.
Simpson also notes that this isn’t some kind of altruistic exercise on his part. Companies with more diversified boards have a well-documented history of doing better on the numbers, with better recruitment efforts and credit for higher performance levels, which he underscored by finding that the biotechs with women on their boards actually saw their stock perform better than shares belong to their all-male counterparts in the industry.
I talked to Simpson and two prominent VCs, Wende Hutton at Canaan and Abbie Celniker, who recently became the first woman to be named an investing partner at Third Rock after wrapping up her stint as CEO of Eleven. Here are some excerpts of our conversation:
Karl Simpson: There is obviously a strong reliance on venture capital to fund the sector and that’s inescapable. Problem being is that the venture capital community is not a particularly diverse community in itself. And to rely on them to be more progressive in their diversification — to get diversification onto the boards of the portfolio companies — presents a particular issue because clearly they’re not necessarily going to diversify as quickly as we would like to happen. The report definitely suggests there is an issue with VCs. So unless we can diversify the VCs, we’re going to have to find other, more creative approaches to diversify the companies that those VCs are invested in. Given that many of them, or most of them, are private organizations, they’re also sort of the breeding ground for directors to grow their capabilities, their skills and enrich the pool of director talent.
We need to find ways in which we can get more people onto the boards of these private companies irrespective of the fact that VCs are heavily dominating those boards. So there’s definitely one systemic challenge.
Another systemic challenge is the over-reliance on personal and professional networks to appoint directors. I also believe there’s a lack of true understanding, clarity about what experience, qualities, and qualifications are needed on boards as organizations evolve from the early stage to more mature public entities. I think a better understanding would bring better predictability into the types of directors you need to appoint, and the skills and competencies those people must display, which would help us be better at planning who to appoint, when to appoint, and where to find those people.
Wende Hutton: We have to step back and look at two major inflection points of how to get the number of women on a board up in this ecosystem. The first is the time of funding — and that might be a very closely held board of 5 to 7 members very much driven by the venture investors and the sponsors from the venture firms sitting on the board. Some additional members of the board are typically added who are independents, and that’s an opportunity to change the complexion of a private board. We have to bring more diversity into the venture investors, and who’s sponsoring deals and who steps onto those boards, from day one to change that first point of inflection. We can do some of that through who we recruit as independent numbers.
The second point of inflection is certainly resetting the table at the time of the IPO and how board members are going to evolve on and off the board. What I like about this report is it really shines a bright light on a number issues where there could be opportunities. There are things like an over-reliance on both the private boards and the newly public boards on CEOs recruiting other CEOs to sit on their boards. By definition, when you look at the statistics that Karl pointed out, if you’re relying on CEOs in the industry of that kind of stature, you can easily fall back into that argument: Is the pool even there?
If you take broader look and say diversity is extremely important for performance — it’s important for recruiting the best people. It’s important for decision making. It’s important to broaden networks for company to grow and do deals. If you take that broader view and say, ‘wow, that CEO buddy I sat on his board now I’m going to have him sit on my board,’ and you toss that out the window and say ‘we’re going to look more broadly with purpose for diversity on the board,’ I think there are reasons we can accelerate this progression. There are some basic problems that we have to break through.
Abbie Celniker: Listening to Wende, something that occurred to me and something we’ve all experienced as CEOs, is a lot times we get asked whether we are comfortable with somebody coming on as a board observer. Even though you know the investors who are standing the deal are going to be more likely to be men as a result of just how the VC industry has been staffed, there may be some ample opportunity for firm board observers to be named and to come onto those boards earlier such that when the major investors are ready to step back or step off, they know that they still have firm representation. Somebody who has been mentored during active board sessions could take a lead role, and there could be some very intentional substitution even pre-IPO.
It just occurred to me that board observers are often learning opportunities for folks who are coming into venture but you could also be naming board observers who may not be necessarily part of a firm. That’s one thing that occurred to me as I was putting that equation together.
The other thing that occurs to me is that what Wende is saying is when you consider the diversity of a board and you consider even the independents that are usually brought through networking. We’re always looking within our same industry. There are some very talented people who are in sister industries who are interesting (or what you call adjacent industries). There are some very talented people that we may be able to broaden our horizons a little bit, and maybe we pull from those pools to find more women who could step on to bring what we’re looking for. I think there is your question, ‘was I surprised?’ Sure, but I’m also one that just immediately jumps to what are some solutions. I think that there are some really pretty simple ones that we can start to think about as a result of the simplicity of the problem.
Wende Hutton: All male venture capital firms now are out actively trying to bring in their first female investment professional. When you start to bring in that diversity, you recruit the talent. We have not lowered our bar in any way shape or form. We have outstanding junior people we’ve brought on the team. When people start to make that move, they see their horizons broaden, their talent pool broadens, their recruiting prospects broaden. We don’t give ourselves a hall pass at all in performance. We’ll put our numbers up against any firm in the venture world.
I think that realization is starting to dawn on the venture community. They’re also getting pressure from their limited partners. Most of our limited partners are from state pension funds, and funds of funds, which have a much higher percentage of senior women in the investment professionals side of money management. They’re ranked and rated on diversity, and backing diverse private equity funds. They’re getting some pressure from that standpoint as well.
Abbie Celniker: MassBio has made it a real focal point. By virtue of that, I think all of the companies and VC firms in the Boston area have sort of been rallied and asked to literally sign up to do something proactive. I am hearing and seeing a lot more about it.
(Third Rock co-founder) Mark Levin came up to me the other day and said he was talking to the head of HR that’s done one of these proactive board readiness programs for their executives and wondered what we could be doing differently for some of our execs within our port. I think that there is a lot of conversation going on about it.
Karl Simpson: One of the things that this report pulls out is we see evidence of women joining boards. There are less companies with all-male boards than there has been when we previously studied them. But women that are being appointed to boards, they’re not necessarily being appointed to positions of power on that board. So the chair, the CEO, chairing the committees, their ability to influence, and that suggest perhaps a degree of tokenism, a lack of inclusiveness. It’s really that cultural shift that has to take place. It’s not just about changing the numbers, it’s changing the culture so that women have a voice in the operational management of the company if they’re part of the executive team. If they’re on the board, then obviously the board is thinking about the strategic direction of the company. That’s really an important distinction to make.
John Carroll: I’d like to wrap this up with one question. Based on what you know and based on the figures that Karl put together, it would take 40 years to reach gender parity in biotech, what are your own personal guesses? In terms of how long it’s going to take before we see real gender parity in biotech companies? Wende you want to start?
Wendy Hutton: Well with the crop of MDs and PhDs in the pipeline, my hope is we can easily half that number if we work at it. I’d love to see much more progress in the next 10 years on a more accelerated exponential basis.
John Carroll: Abbie how about you?
Abbie Celniker: Yeah, I have to agree with Wende. I think that we’re going to see a lot of progress sooner than 40 years. As far as hitting parity, I think that it’s just going to take a little bit longer. With a lot of work and effort, you’re probably going to get to a plateau of where you’re starting to see the right balance within probably about 20 years. I’d go with Wende on the 10 years to see substantial change and not going to see parity before 20.
John Carroll: Okay, Karl, what do you think about that?
Karl Simpson: You’re going to have more role models, which will inspire more women to have that kind of aspiration. I think it will accelerate the pace of change, but I would say parity is still 25 years away.