Gender Diversity in the Boardroom Slips
By Bonnie Gwin and Jef Sanders

Parity for incoming women directors is not expected until 2032

Despite a record number of new appointments to Fortune 500 boards in 2016, diversity progress for women in this group slipped into reverse.

It was the first decline in female appointments since 2009 when Heidrick & Struggles’ Board Monitor first started tracking non-executive director trends. The study also found headway for African-Americans, Hispanics, Asians and Asian-Americans remained uneven.

The 421 vacant or newly created seats filled in 2016 outpaced the previous high of 399 appointments in 2015 and greatly exceeded the low of 279 appointments in 2010 during the eight-year period since the inception of the annual study.

Of the 421 available seats in 2016, women assumed 117, or 27.8%, down from 29.8% in 2015. And the figure for 2015 was only slightly higher than the figure for 2014, suggesting that the slowdown was already under way.

In 2014 we projected that at the then-current growth rate women would account for 50% of newly appointed directors for the first time in 2024. In light of the data in 2015, we calculated that it would take an additional two years for female director appointments to reach parity with male director appointments.

Now, given the decline in the growth rate in 2016, we estimate that women would not achieve parity with men until 2032.

Consumer industry boards appointed the largest number of women overall — some 35 out of the total of 117. Industrial boards appointed 28 female directors, financial services boards appointed 17, and technology boards, 16. But while consumer boards appointed the largest number of women overall, those appointments represented only about one quarter of all available board seats in the industry.

In business and professional services the 13 seats taken by women represented half of all new directorships in the industry. In technology the 17 positions filled by women represented 40% of all new directorships in the industry. Women took 30% of available seats in the life sciences industry, 28% of the seats in the financial services industry, and 21% in the industrial sector.

The relatively large percentage of technology seats that went to women offers one bright spot in an otherwise dim picture for gender diversity. It’s no secret that the technology industry, and Silicon Valley in particular, has a poor record when it comes to placing women in senior positions, including at the board level. The question is whether this year’s percentage of female appointments promises better things to come or is merely an anomaly.

One thing that’s clearer is the positive correlation that researchers have found between gender diversity on boards and superior shareholder value. Boards appear to have been aware of this in recent years.

In 2009, only 18% of new directors in 2009 were women. With steady year on year gains the figure became almost 30% by 2015. Does this year’s slippage indicate a new ceiling? If so, boards will likely be pressed to revisit the research on the power of diversity in creating business value.

The story for African-Americans, Hispanics, Asians and Asian-Americans shows little in the way of a clear upward trajectory of the kind women experienced (until this year):

• The figure for African-American appointments has been as high as 10.3% in 2013 and as low as 3.2% in 2010. In 2016, African-Americans constituted 9.3% of new appointees, unchanged from 2015. Of the 39 African-American appointees, 13 went to industrial boards and 11 to consumer boards. In terms of the total number of board appointments by industry, African-Americans assumed more than 18% of available life sciences seats, almost 10% of industrial seats, and a little over 8% of both consumer and financial services seats.

• Hispanics did hit an eight-year high of 6.4% of board appointments in 2016 versus a low of 3.9% in 2011. But Hispanics continue to be under-represented on boards. For instance, just 4% of available seats in 2015 went to Hispanics, though Hispanics constituted nearly 18% of the U.S. population. Further, there had been no discernible trend over the previous seven years, with Hispanics comprising between 3.9% and 5.4% of new director appointments each year. Of the 29 Hispanic directors appointed in 2016, the majority — some 16 — joined consumer boards.

• Asians and Asian-Americans constituted a little over 6% of new appointees in 2016, up from 4.8% in 2015. But like African-American and Hispanic appointees their numbers have fluctuated over the past eight years, hitting a high of 8% in 2011 and a low of 3.4% the following year. Of the 27 Asian/Asian-American appointees in 2016, 11 went to technology boards, six to consumer boards, and four each to financial services and industrial boards.

Despite the uneven trajectories and low percentage of appointments for African-Americans, Hispanics, and Asians/Asian-Americans, a slight upward trend in their aggregate numbers has occurred.

In the past four years, the proportion of African-American, Hispanic, Asian, and Asian-American appointments taken together averaged 20.1%, more than four percentage points higher than the 15.8% average for the previous four-year period 2009–2012. When the numbers of board directors of African-American, Hispanic, and Asian descent reach critical mass, which will enable statistically significant correlations with shareholder value, we believe the results for these groups will be the same as those for women and shareholder value.

In the meantime, companies and industries that fall short in hiring and promoting diverse senior executives will continue to face pressure. As they make up for lost time, the pool of diverse board-ready candidates will expand. But there is no shortage of such candidates now and avenues for finding them are readily available. (See, for example, “The way forward,” in Heidrick & Struggles’ Board Monitor 2014: Trends in board composition over the past five years.)

However, competing pressures may slow progress.

For example, because diverse executives occupy far fewer senior executive positions than white males do, the push in recent years to limit the number of boards on which an active executive can serve could further reduce the pool of diverse candidates. And as long as boards put CEO experience at the top of the list of qualifications for new board members, diverse candidates will continue to be overlooked.

Further, the relatively low number of women executives serving on boards today will mean, over time, fewer board-experienced women executives who will be available later in their careers — thus potentially limiting opportunities for women among companies that prioritize board experience in a candidate. Of the 421 board appointees in 2016, 315 had previous or concurrent board experience. Of those 315 experienced directors, 237 are men and 78 are women; 27 are African-American; 20 are Hispanic; 17 are Asian/Asian-American, and 251 are Caucasian.

Overcoming those structural obstacles to greater diversity will require time, attention, and commitment.

Forward looking boards and nominating committees will insist on being presented with diverse slates of director candidates. They will challenge their assumptions about what constitutes an “ideal” director (it’s not always a CEO). And they will focus management attention on recruiting and developing diverse executives. Otherwise, the needle will continue to move slowly, if at all,  delaying the business payoff that diversity delivers. 

Bonnie W. Gwin is vice chairman and co-managing partner of Heidrick & Struggles’ CEO & Board Practice; she is based in the New York office.

 Jeffrey Sanders is vice chairman and co-managing partner of the CEO & Board Practice; he is based in the New York and San Francisco offices.

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