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Report: Biotech VCs Perpetuate Boardroom Gender Gap

Xconomy National — 

If power in the business world is centered in the boardroom, women in biotech have a long way to go to get their fair share—and the venture community deserves much of the blame. That’s according to British recruitment firm Liftstream and its new study of biotech companies that went public in the recent boom years.

In the mega-class of 177 biotechs that went public from 2012 through 2015, women held 11 percent of the board seats, according to their 2016 regulatory filings. That’s a low figure for an industry whose rank and file is roughly 50 percent women. While there is a glimmer of movement toward gender diversity—more than half of companies (58 percent) have at least one female board member, compared to 48 percent in Liftstream’s 2014 industry survey—the new report says that the glimmer could be fleeting: “Boards have so few women (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.”

At the current rate of progress, gender equality on public biotech boards would arrive in 40 years, the report says.

Liftstream’s 2014 report found that 9.6 percent of the top rank of biotech VCs were women. (Corporate venture groups at firms like Pfizer, Roche, and Sanofi, by comparison, were roughly double, according to the report.)

That traditional VC profile is at the root of the biotech problem, says Liftstream: “Our study shows that the male dominance of venture capital brings unintended implications for the portfolio companies in terms of their board diversity, and consequently may also have an undesirable effect on their ability to attract talent.”

VCs tend to crowd the boards of companies up to, and sometimes beyond, the IPO, and that directly affects the diversity profile of those public companies. In the 177 companies Liftstream examined, women counted for less than five percent of all board directors at the time of IPO. About 60 percent of VCs remained on their company’s boards three and four years post-IPO. When VCs exit boards, the number of female directors increases, the report says.

A biotech recruiter not affiliated with Liftstream agrees that some VCs stay on boards too long and limit opportunities for others. The problem is not that women shy away from male-dominated companies: “I haven’t observed or heard about women in biopharma rejecting opportunities to consider board seats for that reason,” says Pearl Freier of Cambridge BioPartners in Cambridge, MA. The problem, says Freier, is that “women are not getting enough calls to serve.”

A recent letter spearheaded by biotech industry groups outlined ten “best practices” that executives and others have pledged to follow.

Wende Hutton and Nina Kjellson, both general partners at bicoastal venture firm Canaan Partners, say that the pledges, which they have also signed, now need to be translated into specific tactics. Kjellson suggests that women should sit on or run a board’s nomination/governance committee, the subgroup of directors that organizes recruitment. Someone needs to explicitly ask, “How do we find a person of color or a woman?” for an open board position, says Kjellson, and not just rely on personal references as a qualification.

“CEOs like to say that the best board members are CEOs,” says Hutton. But fewer than eight percent of the companies in the Liftstream study have female CEOs. “The women who came up through PhD programs or medical school in large numbers in the ’70s, ’80s, and ’90s are now at the peaks of their careers. Those women are out there,” says Hutton, but they are not necessarily CEOs, so if “the [criterion] is ‘has to be a CEO,’ there’s going to be a gap.”

The Liftstream report also notes that companies that give the CEO a dual role of board chair tend to have worse diversity. “Companies should make it a priority to have separate roles at startup,” Hutton says. (In addition to Hutton and Kjellson, Canaan has a third woman, Julie Papanek, among the healthcare partners, making Canaan rare if not unique among its peers.)

Recent efforts to get more women into biotech boardrooms have just gotten started. Last year, in the wake of the infamous 2016 J.P. Morgan party with scantily clad women hired as cocktail waitresses, the group Women In Bio started a five-day training program, Boardroom Ready, with an inaugural class of 20 women. Three have been placed onto boards since graduation, says Women In Bio president and chair Dawn Hocevar. (One of the three took a board seat at the laboratory equipment supplier where Hocevar is VP of national business development.) Hocevar says the program will take place annually, with more focus starting this year on preparing participants for board placement in life science companies, and not just on boards in general.

On the West Coast, meanwhile, venture veteran Lisa Suennen launched last year a nonprofit mentoring network for women called C-Sweetener.

Like past reports from Credit Suisse, the Peterson Institute for International Economics, and McKinsey Global Institute, the new Liftstream report notes that gender diversity at the leadership level is good for business. From IPO to late 2016, the companies with at least one female board member had an average share price increase of 19 percent. Companies with all-male boards showed an average decrease of nine percent. Share price and other financial metrics are important because the issue of gender diversity is “slowly pushing into the shareholder advocacy world, whereas ten years ago all you heard [when raising the issue] was crickets,” says Kjellson.

Photo by reynermedia via a Creative Commons 2.0 license.