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Board members with marketing experience improve shareholder returns by 3% [benchmark]

Just 2.6% of boards have directors with marketing experience, but 100% have directors with finance experience

Companies that have board members with marketing experience outperform companies that do not. That’s the high-level finding of an academic study titled, When and How Does Board-Level Marketing Experience Impact Firm Performance?

More specifically, the research found:

“A board with one marketing-experienced director is associated with a 3-percentage point increase in total shareholder return over a board with no marketing-experienced directors.”

In other words, companies that have a member of their board with marketing experience yield higher shareholder returns.

The effects are even more dramatic on companies experience declining growth and in need of a turnaround:

“When firm market share is declining by 1.5 percent, the presence of a marketing-experienced director is associated with an increase of more than 6 percentage points in total shareholder return.”

The study was conducted, in part, by reviewing 64,086 biographies for a total of 12,106 board members and across 1,091 firms “from Standard & Poor’s (S&P) 1500 firms between 2007 and 2012 and identified board members with marketing experience.”

Some of the demographics they found:

  • An unbelievably low percentage of all board members [12,106] – just 2.6% – had marketing experience;
  • Just “16% of boards [1,091] had at least one” director with marketing experience; and
  • Board members with marketing experience “tended to be younger and were more frequently female.”

By comparison, “100% of boards now include at least one designated finance expert among their memberships, many boards have multiple finance experts.”

The researchers then examined three measures of financial performance among the firms including market share, revenue growth and shareholder return.

Among the conclusions:

“…the relationship between board-level marketing experience and TSR is positive and significant (β = 0.03, p < 0.01). By itself, this finding suggests that boards with marketing experience do, in fact, create value for shareholders; specifically a board with one marketing-experienced director is associated with a 3 percentage point increase in TSR over a board with no marketing- experienced directors.”

The authors, Kimberly A. Whitler, Ryan Krause, and Donald R. Lehmann, published their findings in the Marketing Science Institute and the Journal of Marketing by the American Marketing Association.

All three authors were academics at the time of the study, but it’s worth noting Whitler has roughly 8 years of experience as a chief marketing officer (CMO) at three different companies, as well as board experience. She currently teaches at the Darden School of Business.

companies that have a member of their board with marketing experience yield higher shareholder returns.Click To Tweet

While I recognize the study is dated, however, there isn’t any other study I’ve seen that’s this thorough and conclusive. Moreover, the authors present a substantive foundation of research on which they built their study, including:

  • 2007: “Gordon (2007) suggests: ‘few directors have had hands-on marketing roles and fewer participate in board committees focused on marketing. Given this lack of experience and attention, boards have difficulty providing effective governance of the marketing function.’”
  • 2011: “According to a 2011 survey, only 4% of corporate directors consider marketing an important type of experience for a board member, as opposed to 47% who believe finance experience, for example, is important (National Association of Corporate Directors 2011).”
  • 2012: “Somewhat paradoxically, a recent survey conducted by executive recruiting firm Heidrick and Struggles (Groysberg and Bell 2012) indicates that board members consider marketing-related issues among their biggest challenges.”
  • 2013: “Spencer Stuart, a leading executive recruiting firm, found that of the 9,800 board seats at Fortune 1000 companies, only 38 were held by active marketing leaders – less than half of 1% (Daum and Welch 2013).”

* * *

I was reminded of this study during a recent webinar by REQ – What’s Hot + What’s Not in Marketing and Communications (embedded nearby) – so I wanted to go dig up the data and review it for this post. A new study would make a great project for a Marketing or PR PhD student.

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Image credit: DALL-E

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