Directors of Corporate Boards
Corporate Boards “are gradually diversifying.”
Fortune 500 Boards of Directors
26.5%
In this section, we provide the state of female representation on American corporate Boards of Directors, looking at different studies that identify “top” companies through slightly different measures (which all overlap highly) – the Fortune 500, the Russell 100, Russell 3000, and the S&P 500.
Catalyst, citing research by Spencer Stuart about corporate Boards in 2021, reports that “Boards in S&P 500 and Fortune 500 Companies Are Gradually Diversifying.”[1] The numbers indicate that nearly 30% of S&P 500 Board Directors are women (in 2020), and 2021 found “no all-male boards; all companies have at least one woman director.”
Still, “representation of women … remains low.” Just over a third of 2021 Boards have three or four female directors, and 4% of boards have a lone woman on the board.
S&P 500 Companies, under public pressure, and following previous pledges, are appointing women and BIPOC women to open posts. Women accounted for 47% of new directors in 2020 and 43% of new directors in 2021.
Fortune 500 companies are also making strides, with 26.5% of board members being women in 2020.
Fortune Magazine identified that women held just 15.7% of all board seats in 2004, rising to 25.5% in 2019.
Corporations that pledge increasing diversity and representation:
Among America’s top Corporations, which have corporate policies that pledge or legislate diversity and representation, towards a stated percentage of Board members being women?
A research and advocacy group titled 2020 Women on Boards has been tracking the representation of women on the Boards of Directors of America’s largest companies since launching the Gender Diversity Index in 2011, with the initial aim of having Boards be 20% by 2020, and help shareholders, public companies and soon-to-be-public companies increase the diversity of their Boards through a variety of measures.
2020 Women on Boards reported that the Fortune 1000 reached the diversity goal of 20% female directors in 2017, reaching 22% in 2018. In order to identify trends, the group switched focus to the Russell3000 Index for a broader view of American corporate leadership, and the Russell 100 for data on the top tier of companies. 2020WoB also focused on the composition of the board of directors of IPOs, which tend to have less diversity, but represent new and upcoming companies and sectors.
2020 Women on Boards discovered that “Big companies get it. Small companies don’t.” While women hold 17.7% of board seats in the entire Russell3000, at the largest Russell100, the figure is 25.3% and climbing, while the smallest 1000 of these companies (R2001-3000) have just 13% of directors who are female. The largest 25 IPOs which launched in 2017 had just 9.2% of board members who are women; moreover, 12 of these 25 went public with no women on their boards, and 80% of them went public with zero or one female board member.
Quartz publishes a list of the companies with no women at all on their Board of Directors. In 2017, this totaled 624 companies in the Russell3000.
The largest companies continue to increase diversity on their Boards, often led by shareholder initiatives, employee interest, public pressure, and growing research that diverse boards lead to better bottom lines and outcomes. The Russell100 boast 25.3% percent women on their boards, a total of nearly 300 women, an average of nearly 3 female directors per board. The Russell1000, the next largest group, averages two women per board; 21.3% total. As stated, the smallest one-thousand of these 3000 large public companies average just one woman director per board, or 13% of the total. Why are three female directors on a board significantly better than one or two (not to mention zero)? As Catalyst reports, a growing body of research has found that three or more women are needed in a group to create a “critical mass” of women’s voices, which often leads to better financial performance.
Companies are increasing their female board members with a few clear strategies, such as replacing any retiring male board member with a female one. Most interestingly, 63% of the 545 companies that added women board members managed it by increasing the size of their Board of Directors, a trend first identified in 2012. In this way, companies can add women directors more rapidly, and achieve a larger percentage of women on their boards.
And according to PwC (Price Waterhouse Coopers), board directors classified as “younger” (age 50 and under) are increasingly female, with 61% of first time “younger directors” being female. That is, when new, younger directors are added, there is a push for them to be female, to increase the diversity of the board. The PwC report also pointed out that “In the S&P 500, more than half of the new women joining boards in 2018 came on when the board increased its size” – a finding consistent with the 2020WoB findings in the Russell1000.
Additionally, Catalyst’s report Women on Corporate Boards: Quick Take states that a few states are mandating quotas for Boards of Directors, following the lead of countries such as France, Germany, Netherlands and India. California requires publicly traded companies to include women on their boards, though this mandate is being challenged. Washington State’s June 2020 Washington Business Corporation Act mandates a “gender-diverse board” by 2022. Two states have passed legislation ‘encouraging’ an increase of women on boards, and five additional states have legislation pending.
Jaeger, J. (2020, November 3). Emerging state board diversity laws encourage proactive approach. Compliance Week.
What will it take for women to get into the Power Percentage of the Boards of Directors of the Fortune 500?