The boards of Fortune 500 companies are expected to achieve gender parity among the incoming class of directors by 2023, according to projections from Heidrick & Struggles' recently released 2019 Board Monitor. This projection is based on the finding that women filled 40 percent of new board of director seats in 2018—the highest percentage in the 10 years the company has tracked board diversity. In 2009, women filled 18 percent of new board seats.
Additionally, of the Fortune 500 boards examined for the study:
- Black board members held 11 percent of the seats in 2018, up from 5.3 percent in 2009.
- The percentage of Asian and Asian-American board members nearly doubled, to 8 percent in 2018 from 3.9 percent in 2009.
- Hispanic board members made up 4 percent of board memberships in 2018, down from 5.1 percent in 2009.
Bonnie Gwin, vice chairman and co-managing partner of the global CEO and board practice at Heidrick & Struggles, called the findings significant, saying they showed "the long-term progression of gender, racial and ethnic diversity in the boardroom."
"Companies are focused on including wide-ranging points of view and experiences by adding greater numbers of women and racially and ethnically diverse members to their boards," she said in a news release. There's still work to be done, though, to reach gender parity by 2023, she noted.
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2019 report by CGLytics, which specializes in corporate governance, pointed out that total female board representation at S&P 500 companies was 24 percent in 2018, up just 1 percent from 2017.
And the report,
Diversity in the Boardroom: Pushing Forward, Reaching Back, from the KPMG Board Leadership Center and the WomenCorporateDirectors (WCD) Foundation's Thought Leadership Commission, found that 17 percent of directors at the top 200 S&P 500 companies are black, Hispanic/Latino or Asian—unchanged from 2017 but up from 14 percent in 2008.
Some states have taken steps to ensure board diversity for publicly traded companies:
In May, the Illinois General Assembly passed a bill that would require all publicly held corporations to have a woman, a Latino person and a black person on their boards by the end of 2020. It calls for the secretary of state's office to publish an annual report on diversity on corporate boards and to fine corporations that do not comply.
In May, the governor of Maryland signed legislation into law, effective Oct. 1, 2019, that promotes gender representation on corporate boards. It urges all nonprofit, privately held and publicly traded institutions and companies doing business in the state to have a minimum of 30 percent of female directors on their boards by Dec. 31, 2022.
Last year, California became the first state to pass a similar law. Publicly traded companies that are headquartered there must have at least one woman on the board. Boards with five or more members would need to add two or three women by the end of 2021.
- Over the last several years, Colorado, Massachusetts and Pennsylvania have adopted nonbinding resolutions to encourage companies to diversify their boards by having at least one female director.
And Rep. Carolyn Maloney, D-New York, who chairs the U.S. House Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets, has introduced the Diversity in Corporate Leadership Act of 2019. It would establish a model for boosting board diversity and create an advisory group that would conduct a study and provide recommendations on private-sector strategies to increase gender, racial and ethnic diversity among boards of directors.
The Motley Fool
Some organizations are acting on their own to foster diverse board representation.
The Motley Fool (TMF), a financial services company in Alexandria, Va., was looking for gender diversity on its male-dominated board that in 2015 had only one woman. This year, Marthe LaRosiliere, TMF general counsel, and Randi Zuckerberg, founder and CEO of Zuckerberg Media, joined Suzanne Frey, vice president of engineering at Google, and Teresa Kersten, vice president of consumer marketing at LinkedIn, on the seven-member board. Kersten joined in 2016 and Frey in 2015. Terms are for one year, although members often serve longer.
"At the onset of each [board member] search, we ask ourselves, 'What are the company's strategic objectives?' " TMF chief network officer Maggie Dorn said. " 'Does this leader have experience in areas dealing with our biggest priorities? Will this leader get The Motley Fool to where we want to be in five years?' "
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Looking at board membership as a leadership development opportunity for its employees, the company reached out to staff for peer nominations for one of the seats. LaRosiliere was one of 42 candidates.
To recruit women for its board, the company leveraged its internal and external networks, Dorn said. It also set guidelines that helped the company make more-informed decisions that has allowed the board "to stay focused and on track, accountable and to keep our stakeholders informed at various points," she noted.
"What has helped us in our approach" to a diverse board "is being flexible in our criteria and being open to candidates from various career levels as well as candidates operating in different industries. We're including people who are not yet senior vice presidents or [at] C-suite level. That has made a world of difference," she said.
"In general, I find it hard to believe that in this day and age, it's difficult to recruit qualified female board members," Dorn said.
Fast-Tracking Board Diversity
Organizations and search firms need to be open to board candidates who work in industries that are different from yet have parallels to their own, Dorn said, and they need to extend the search beyond CEOs "to include talented candidates from various levels with diverse perspectives and experiences."
They also should look at their company's employee demographics and customer base when building board diversity. The KPMG report noted that Hispanic people make up nearly 20 percent of the U.S. population, and Chinese consumers and companies increasingly influence the global marketplace. Additionally, 70 percent to 80 percent of all consumer purchase decisions are made by women.
Other ideas for fostering board diversity can be found here. Heidrick & Struggles pointed out, though, that board diversity cannot rest solely on the shoulders of the board chair.
"Unless the chairman, joined by other influential directors, makes [diversity] a priority, good intentions rarely turn into action."