The push to get more women onto corporate boards of directors is getting a lot of attention lately, particularly as a result of investors urging companies to make it a priority. The good news is that nearly all directors (96 percent) agree that diversity is important, according to PwC’s 2016 Annual Corporate Directors Survey.
Then again, consider this: In 2016, Fortune 500 companies filled 421 vacant or newly created board seats with non-executive directors, which is a new high as recorded by the Board Monitor, an annual study of board composition, experience, turnover and diversity conducted by executive search firm Heidrick & Struggles. But despite the focus on adding women to director seats, the study found that women were appointed to 27.8 percent of director seats that turned over or were added to the boardroom roster in 2016, a two-percentage-point decline from the year prior, which ends a seven-year run of year-on-year gains.
“I was actually very surprised, because there’s a lot of conversation about the importance of diversity, and I think there’s a lot of commitment to it,” Bonnie Gwin, co-managing partner of Heidrick’s CEO & Board Practice, says in a Washington Post article. “But at the end of the day, boards lean toward appointing CEOs and CFOs [to fill director positions], and there’s not a lot of diversity in that pool of candidates.”
Gwin isn’t alone in that observation, as other studies also point out that most board members generally don’t look far beyond the boardroom for new directors. Indeed, the problem, says John Roe, managing director of ISS Analytics, which conducted a study of 105,000 directorships, is that most board members get hired based on the recommendation of existing directors—who are mostly male and whose networks tend to consist of other male directors.
Interestingly, according to ISS’ research, first-time female board members aren’t common. When a woman fills a board seat, there’s a 32 percent chance she’s already served as a director at another company, the study found. When a man takes a board of director position, however, there’s a 23 percent chance he’s already held a seat. The gap then suggests that to get chosen to be on a board, someone must already be on a board, Roe says.
The good news is that the PwC research does indicate a shift is starting to take place. Calls for board diversity and investor influence on board composition have prompted some boards to use less traditional sources to find new directors. For instance, some boards are beginning to use search firms and management recommendations as sources for recruiting efforts.
In the meantime, there were bright spots for diversity in Heidrick & Struggles’ report. For one, Hispanic directors made gains, particularly at consumer-facing companies such as retailers and consumer packaged-goods firms. Secondly, tech companies are perhaps now more sensitive to the scrutiny they’ve received over their low numbers of women in leadership roles, Heidrick & Struggles notes. Indeed, 40 percent of new directors at tech companies were women—13.5 percentage points higher than the year before and well above the overall numbers, according to the report.
What are your thoughts on increasing diversity among boards of directors? Are there women on your company’s board of directors?