Women are gain­ing more board seats in biotech, but re­al change is hap­pen­ing at a snail's pace

Wende Hut­ton, Can­nan

Source: Lift­stream

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.

Ab­bie Cel­niker, Third Rock

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.

Karl Simp­son, Lift­stream

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.

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Novotech CEO Dr John Moller said China offers the largest population in the world, rapid economic growth, and an increasing willingness by government to invest in research and development.
Novotech’s 23 years of experience working in the region means we are the ideal CRO partner for USA biotechs wanting to tap the research expertise and opportunities that China offers.
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