'Only 13 calls to make': a Q&A with executive search firm partner Darren Raycroft on diversity in the biotech C-suite

Just 13 CEOs are women out of 224 surveyed small-cap biotechs in a new report on board and executive compensation from the Bedford Group/Transearch. (Dimitri Otis/Getty Images)

If you’re paying attention even a little bit to the diversity of the biotech C-suite, it’s easy to see that there are few women or visible minorities at the top. But just how bad is the situation?

Well, just 13 CEOs are women out of 224 surveyed small-cap biotechs in a new report on board and executive compensation from the Bedford Group/Transearch. Of the 760 named executive officers surveyed, just 15% were members of a visible minority. 

The study covered publicly traded companies with market caps below $2 billion with headquarters in the U.S. A visible minority is defined as executives who were visibly non-Caucasian based on a visual scan of publicly available images. 

The following is a Q&A with Fierce Biotech and Darren Raycroft, partner and managing director at Bedford. The firm is an executive search firm that helps companies with succession planning, executive and board compensation, diversity and inclusion services and more.

Responses have been lightly edited. 

Darren Raycroft (Bedford Group)

Fierce Biotech: 13 CEOs are women out of 224. I knew the situation was bad, but this puts it in stark contrast. What do you think about this data point and why we’re not seeing more women in the C-suite?

Darren Raycroft: Couldn’t agree more, from our work recruiting CEOs, we knew the number was low but this was lower than we would have anticipated. When contextualized across other data points around female CEO representation in broader industry indexes, it does show this segment of the biotech industry has work to do.

Given this report focuses on sub-$2 billion Nasdaq-traded biotechs, many founders are still operating in the CEO role and one could state that there needs to be a stronger ecosystem of support for female founders, inclusive of having access to capital to help their respective organizations scale. Moreover, the preference for boards and investors to work with “proven and experienced, demonstrated CEOs” becomes a self-fulfilling prophecy in leading to a disproportionate amount of male appointments.

On compensation, what do you think is behind the pay gap between men and women? And same question for visible minorities, why do you think this gap is happening?

Although the prevalence of female board members is low (14%), the percentage of females that hold the board chair role was equally distressing and similar to what we saw with visible minorities. This could be one of the reasons we saw some dispersion at the board level, as there is additional compensation attributed to the board chair role and other committee and chair roles that an individual would take on as a board member.

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As it relates to named executive officers, it is no doubt a more complicated web. Specifically when you look at CEOs, where at 75th percentiles for organizations between $1 billion and $2 billion (i.e., where the top earners are), this pay gap significantly skews in the favor of Caucasian peers. One can only speculate, but perhaps there is additional compensation for exceptional track records of performance that, due to the disproportionate amount of Caucasian CEOs historically, seem to favor them.

Many companies have ESG initiatives. I just wrote another diversity report the other day that says these programs are not resulting in meaningful action to get diverse candidates into leadership positions. Do you think the industry is doing enough when it comes to ensuring a diverse range of voices are at the top?

I've worked with numerous clients in this industry whose ESG initiatives are resulting in meaningful action within their organization and communities, however, the report would suggest that on a broader scale, there is still a lot of work to do. The specific reasons will be unique to each organization but inextricably are centered around organizational culture and commitment. It does not seem that change will endogenously occur and there needs to be exogenous pressure and requirements in order to catalyze the type and scale of change required. Initiatives like the Nasdaq diversity proposal and venture capital firms and other investors requiring diversity as a pre-condition of engagement should start to move the dial.

I know this is your first time looking at this data, but what does this say about the biotech industry?

Gender equity and diversity in executive roles are issues that nearly every industry struggles with, and the biotech industry is no exception. The percentage of Fortune 500 company CEOs that are women still sits at less than 10%. I’m also not sure we can categorically speak to the entire biotech industry but rather the segment of the industry in which we focused this report, and for that segment (which arguably is the bedrock of the sector and many of these companies will become the next group of leaders in the space), there is no doubt a lot of work needs to be done.

Do you see any reasons to think this situation might change?

First and foremost is awareness, I think even for those of us who operate in this space daily, the data does make you step back and say, yes there is definitely work to be done here. I am eternally optimistic and I believe in the data that supports diverse teams delivering better results, so I think penultimately we will get there, it is just the speed of this evolution that we need to positively impact.

I look no further than to the COVID crisis we are emerging out of. I think it has demonstrated the sheer agility and the speed in which biotech can operate. I think if there is focus and real desire, I would not bet against this segment of biotech becoming a diversity leader.

How do the trends in biotech compare to other industries?

The one thing I would point to here is just the period of tremendous growth, capital inflow, IPO activity and just general war for talent in this space over the last 18 months. This has created situations, where it is not uncommon, for example, to have a proven CEO considering three to five different opportunities as they might be exiting an organization. We see similar trends in the CFO market and this ultimately leads to significant appreciation in compensation packages as companies vie for this talent.

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Outside of technology, there is really no other comparator in terms of these dynamics in the sectors we focus in.

Can you tell me a bit about your experience in executive searches? How does this data match conversations you’ve had with clients in the biotech industry?

There is no question, almost every organization communicates their desire to see diverse slates of candidates, but the reality is many are unwilling in any way to compromise on experiential qualifications. And to be clear, this does not mean crossing a significant chasm on experience but perhaps they are discounting the value a different perspective and experience set may have around the table.

The reality is if you were focused on recruiting, for example on a currently sitting female CEO in biotech in this market segment, there are only 13 calls to make. I think it takes organizational will and the right search partner to say, look they may not have sat in the seat before but they are ready for it, with the provision that there is going to be some learning around X,Y, Z and the organization needs to be there to support.

What are biotech companies looking for when they embark on an executive search?

We generally get a call when it is a “can’t mess this up” type of hire. Every situation has its own unique expectations, organizational cultural nuance, unique leadership mandate and experience set., i.e. a CSO at company Y may be a terrible fit at company Z. Not only do you have the Rolodex and are able to get to the right people, but also able to measure against that hard-to-define notion of fit, is some science and a lot of art that comes with the experience of leading thousands of searches.

Is there an awareness of the problem, or an effort to find more diverse candidates? 

There is no question there needs to be a pull-through of more diversity in the workforce that should lead to more diverse senior leadership. My lens is purely at the executive and board level where I am focused and merely taking a diverse CEO and moving them to another company does not do much to advance industry diversity.

There is no doubt clients are increasingly demanding a more diverse shortlist of candidates for consideration but it feels like, in many organizations, the same old talent acquisition strategies are being deployed with mixed results. For example, if I was to be a bit provocative, why even wait until you have a need or an open rec to fill? If you are really committed as an organization, why not identify and get out proactively and create relationships with diversity candidates for critical leadership roles, to understand where they are in their career and whether they might be a good fit for your organization? If they are not in that role today, how might your organization uniquely be able to help support them into that role?

Take time to understand the candidate as a unique individual and invest some organizational social capital in the relationship vs being in a time-constrained situation where your CFO just left and you need to fill the role immediately. There is going to be a natural compromise.