Egon Zehnder recently released “The Progress of Board Diversity: Slow Advancement Amid Waves of Change,” the 2024-2025 version of its Global Board Diversity Tracker initiative. The report revealed incremental progress on diversity despite a landscape that presents obstacles both philosophical and legal. We spoke to Cynthia Soledad, Egon Zehnder's global head of DEI, to see why she believes “the questions raised by DEI critics present potential opportunities for innovation, not deletion.”
Directors & Boards: Looking at the results of Egon Zehnder's report, The Progress of Board Diversity: Slow Advancement Amid Waves of Change, what are we seeing around the status of women on boards? Are their numbers on the rise or has there been a drop in director appointments for women?
Cynthia Soledad: There has been a steady increase in the representation of women on boards over the 20 years we have been tracking, and that increase continues. Our 2024-25 study shows that 96% of boards today have at least one woman on the board, up from 93.4% two years ago. However, the percentage of new board appointments made to women in the past two years slightly declined from the prior two-year period, from 35.2% to 34.9%. Given the good retention of previously appointed women on boards, this slight decline in recent appointments has not led to an overall decline in representation. However, if a declining trend in appointments continues and starts to outpace retention rates, we may see an impact on overall representation.
DB: What results are we seeing in terms of underrepresented minority groups and the LGBTQ+ community?
CS: We continue to see steady increases in racial/ethnic minority director representation across both the S&P 500 and the FTSE 250. For example, racial/ethnic minorities hold 24.8% of board seats in the S&P 500 today, up from 23.3% two years ago. Representation of LGBTQ+ directors remains very low, though there has been improvement on a very small base – two years ago, 0.4% of board seats on the Fortune 500 were held by out LGBTQ+ directors. Today, the representation of LGBTQ+ directors sits at 0.8%. We will have to see how the recent decision by the U.S. Appeals Court striking down Nasdaq's diverse representation expectations for boards listed on their exchange impacts these slow improvement trends. Conversations with the directors and C-suite executives we speak to indicate a continued commitment to diverse, inclusive leadership teams because of their importance to the business. We hope to see that commitment come through in continued increases in diversity of representation in the boardroom.
DB: How about diversity of job experience? Are boards still leaning on CEOs and CFOs or are other types of executives finding their way into the boardroom more frequently?
CS: Boards are expanding their consideration set beyond CEO/CFO experience, and the functional diversity is incredibly additive in a boardroom. In the past two years, 23% of new nonexecutive director appointments went to non-CEO/CFO executives. In addition to benefiting from the broad range of functional experience around the board table, representation of women and minorities is higher in functional leadership than at CEO, so there can be benefits to identity diversity in the boardroom when expanding the functional range.