Preparing a board and management team for the journey towards becoming a public listed company requires extensive planning to ensure that they are ready for all that being public throws at them. Leaving this too late can have negative implications for the company because the company’s leadership could be insufficiently skilled, the cadence of change becomes too high, and the disrupted board continuity can weaken the company’s governance.
Therefore, it is reasonable to think that companies preparing for IPO and becoming public would exhibit a more progressive approach to board composition and governance. After all, the benefits of boardroom diversity are well evidenced and have been widely discussed for quite some time. Additionally, public companies are overall viewed as promising businesses, and one would hope for a more progressive boardroom culture. Furthermore, the scrutiny of public companies should push the boards towards increasing the participation of women.
However, in our study of companies that conducted IPO between 2012-2015 in the USA we found that the gender composition of the boards was consistent with the previous findings and show that cumulatively women hold 10.9% of the board seats. This data clearly shows the scale of the situation as the number of board directors reached 1289 directors, with just 140 board positions occupied by women. Although the 177 companies studied might have chosen to apply changes to their boards in the run-up to IPO, the representation of women on the board at IPO is consistent with the market average and implies that women were not a considerable part of any pre-IPO inflow to the boards.
Nevertheless, we found that in the post-IPO period, perhaps driven by public scrutiny, the companies from 2013–2015 IPO years indeed introduced changes to their board composition, and the number of diverse boards (having at least one seat held by a woman) increased. However, having analysed whether women were consistently present on the board every year after IPO, we found that the number of diverse boards decreased, even below the level of IPO. This shows that boards have so few women on their boards (often only one, with an average board size of 7.5), that if one woman director leaves, it contributes to noticeable fluctuations in the number of diverse boards. This effect is a result of a lack of critical mass.
This also shows that despite embarking upon a board transition, although being increasingly educated about the benefits gender diversity, the group of new public listed companies which filed for IPO within 2012–2015 showed very little progress in incorporating gender diversity into the leadership and governance system of their boards. Any small improvements observed do not translate into a sustainable, effectual or transformative change to the system which currently prevents boardroom gender diversity in the biotech sector.