Corporate stakeholders are calling for more diversity on boards, and although the commitment to diversity is there for many in word, in deed there has been slow progress.
For example, women accounted for 21.3% of S&P 500 board seats in 2016, according to Equilar data. Furthermore, just 7.6% of all S&P 500 board leadership positions—CEO-Chair, non-executive chair or lead director—were filled by females in 2016.
Of course, changing the face of your boardroom is not as simple as snapping a finger, even if it's a top item on the nominating and governance agenda. With this backdrop, here are three ways boards can get started on a path to thoughtful board refreshment.
1. Change Your Perspective
Up until now, many boards that have fallen behind the diversity curve point to the fact that there are not enough qualified candidates available. An Equilar analysis conducted earlier this year in partnership with The U.S. 30% Club found evidence to the contrary—approximately four in five females currently serving as public company executives had never served on a board. If boards expand their view beyond who they know or have worked with before, there are significant opportunities to access a deeper pool of potential directors.
2. Disclose Your Progress
Gender is just one example of diversity. While the SEC has considered proposals that would require diversity disclosure, there's nothing pointing to a forthcoming rule yet. By voluntarily disclosing this information, boards can paint a clearer picture to their shareholders and the general public, creating transparent and open dialogue with concerned parties.
According to Equilar data, a majority of S&P 500 companies—or 61.0%—disclosed that they “consider ethnic or racial diversity” when assessing the board or director candidates. However, disclosures of that type are often limited to boilerplate language. A much smaller number of S&P 500 companies disclosed the actual composition of their current board in terms of ethnicity or race—a total of 12.8%, or 64 companies.
3. Seek New Skills
As the corporate landscape continues to evolve, so have the skills required on the board of directors. As new considerations create greater risks, boards are cultivating an array of experience from a diverse set of directors to engender more comprehensive oversight.
New perspectives expand the board's viewpoint on the broader landscape and add a range of voices bringing more depth and detail to boardroom decisions. Moreover, disclosing this information shows investors and other stakeholders boards are taking new corporate risks seriously.
The Takeaway
There may still be a long road ahead before boards reach a tipping point on diversity. However, if they are willing to take a clear-eyed look at the changing demographics of their investors, employees, vendors and customers, boards will find an opportunity to decide whether to
keep the status quo or bring in new directors with the vision to provide long-term value to all stakeholders in this changing marketplace.
