Board Refreshment Drives Progress Toward Gender Parity
By Dan Marcec

Gender diversity on public company boards has become a hot-button topic in recent years, as investors and other governance advisors have shined a spotlight on the issue. Major institutional investors have ramped up action, spurring further discussion and lighting the fire for boards to address more thorough director evaluation and refreshment. Approximately half the population and the workforce is female, but the representation of women in corporate leadership roles pales in comparison.

A case in point, women still only account for a fraction of the total seats available on public company boards of directors. According to the latest Equilar Gender Diversity Index (GDI)—a quarterly update of female directors in the Russell 3000—just 15.9% of board seats belonged to women as of March 31, 2017, up from 15.1% for the full year 2016. The Equilar GDI is now at 0.32, with 1.0 being equal representation of both male and female directors on public company boards.

The Equilar Gender Diversity Index (GDI) was initiated in 2017 and provides quarterly updates on the prevalence of females on Russell 3000 company boards of directors, intended to reflect changes that happen on an ongoing basis in real-time. Equilar collects data from public filings, and because there is no disclosure requirement regarding board demographics, the GDI is centered on male and female representation since that information is clearly disclosed in most companies’ proxy statements and director bios. As more disclosures become available on race and ethnicity on boards, Equilar will continue to track that information as well. 

Some investors have bemoaned the fact that boards are not addressing refreshment quickly or thoughtfully enough. And others have taken action. For example, Vanguard called board composition the number one issue for investors this year, and State Street’s “Fearless Girl” statue on Wall Street or BlackRock’s updated investor guidelines have clearly addressed diversity and the need for boards to take this into closer consideration. Furthermore, public funds like CalPERS and CalSTRS have started their own registries to help diverse candidates gain more visibility.

At the current growth rate of approximately 3% annually, it would take more than 40 years to reach gender parity on boards. To reach parity by 2030, that figure would have to almost triple to about 9%.

With that said, there has been meaningful progress. For example, 24.3% of directors added to boards in Q1 2017 were female, according to the Equilar GDI. Out of 614 total board seats filled in that period, 149 went to women. For the full year 2016, just 21.4% of new seats went to females, which also represented an increase from years previous. Initiatives like the Committee for Economic Development’s “Every Other One”—which advocates that public boards replace retiring director alternating between females and males—naturally gender parity will be achieved. While that may still take some time, the commitment to such initiatives will move the needle.

The number of boards the have actually reached gender parity also continues to rise, though it remains less than 1% of the Russell 3000. As of March 31, 2017, 22 companies in the Russell 3000 had reached gender parity—up from 21 in 2016—while another 46 were between 40% and 50% female representation, an increase from 42 in the year prior.

How these trends will bear out through the rest of the year and into the future remains to be seen. But if the first quarter is any indication, there appears to be an acceleration more broadly in terms of female directorships. The next Equilar GDI will publish in August 2017, following the completion of annual meeting season. At that point, we can expect to see turnover resulting from proxy contests and director elections, and in light of continued calls for further action. 

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