A number of Fortune 500 companies have made headway in diversifying their boards — but the latest installment of a corporate diversity study suggests that if progress remains “painfully slow,” proportional representation could be decades off.
Some 200 out of the 500 companies have boards that are made up of more than 40% women and people of color, or essentially board members who aren’t white men, according to the report published Tuesday by the Alliance for Board Diversity (ABD) in collaboration with Deloitte.
People of color included those who identified as African American or Black, Asian or Pacific Islander, and Hispanic or Latino.
The number of companies today hitting that 40% mark — an initial 2004 goal set by ABD — is almost four times what it was in 2010, found the report, for which the organizations reviewed public filings through last June.
But “while there have been a few gains in board representation for some demographic groups, advancement is still very incremental,” the authors wrote, “with goals of achieving proportional representation to the presence of women and minorities in the U.S. population sometimes multiple decades away at current rates of change.”
In fact, none of the Fortune 500 boards adequately represents the shares of women, Black or African American, Hispanic or Latino, or Asian and Pacific Islander people in the U.S. population.
Women and people of color occupied 38% of Fortune 500 companies’ board seats in 2020, an increase from 34% in 2018. Women overall made up 27% of board seats in 2020, while people of color overall made up close to 18%.
Overall progress on diversity was largely fueled by white women’s gains, the report said.
White women in the Fortune 500 gained the most ground of any group or gender, boosting their boardroom presence by 209 seats between 2018 and 2020, or 21%. Meanwhile, Black women picked up 29 seats (a 19% increase), Asian and Pacific Islander women picked up 28 seats (46%), and Hispanic or Latina women picked up 14 seats (31%).
The analysis also highlighted the “recycle rate,” or the rate at which a person sits on multiple boards, finding that more than a third of the seats occupied by women and people of color were held by people on more than one Fortune 500 board.
This tendency to lean on an established well of names, the authors wrote, is a sign that “the opportunities need to be spread more widely among eligible women and minority board candidates.”
‘While we know board succession planning is a multiyear process, we would hope that boards are inspired to reevaluate their refreshment practices and tap into key opportunities to bring more diversity into the boardroom.’
— report by the Alliance for Board Diversity (ABD) in collaboration with Deloitte
Data from the Fortune 100 showed bigger strides in board diversity: Women and people of color made up 42% of board seats in 2020, exceeding the Fortune 500’s 40% goal, and Latino and Black representation was higher than it was for the Fortune 500. The number of companies with more than half their boards made up of women and people of color also rose from 10 in 2018 to 19 in 2020.
But even among Fortune 100 companies, women and people of color gained a relatively small number of board seats, the report said, and the increase was primarily a transfer of positions from white men to women.
Some studies show that diversity in gender, race and ethnicity on executive teams is correlated with profitability. Many people argue that diversity and inclusion on corporate boards is also a moral imperative.
California, which was the first state to require women’s representation on boards of publicly held corporations, also established a law last fall mandating that publicly traded California-based companies have at least one board member from an underrepresented group with respect to race, ethnicity, sexual orientation or gender identity by the close of 2021.
The report by Deloitte and ABD, the latter of which is a collaboration of the leadership organizations Catalyst, the Hispanic Association on Corporate Responsibility, the Executive Leadership Council, and Leadership Education for Asian Pacifics, reviewed filings through June 30, 2020 — a few months into the pandemic, and toward the beginning of a nationwide reckoning on racial inequities that reached the top echelons of corporate America.
The pandemic and ensuing clamor to address systemic racism “have absolutely accelerated efforts to bring more women and underrepresented communities to the table in order to better reflect the interests of the diverse stakeholders it serves,” the report said, as well as prompted boards to reevaluate what profile of skills and experiences best aligns with organizations’ priorities after a difficult year.
The authors went on to look at data from 37 companies that had filings between June 30 and Dec. 31, finding “no notable increase in board diversity from these companies’ prior filings in 2019.”
“While we know board succession planning is a multiyear process, we would hope that boards are inspired to reevaluate their refreshment practices and tap into key opportunities to bring more diversity into the boardroom,” they wrote.
Data published earlier this year by BoardProspects, a digital platform used by companies to recruit board talent and executive leadership, suggested that about 60% of companies listed in the Russell 3000
index didn’t have any Black board members, and just 5.4% of corporations’ board members were Black.
There was, however, a substantial increase in Black board members’ appointments in the second half of 2020, the BoardProspects report said, with Black board members making up nearly 19% of all new appointments following George Floyd’s murder.
A separate report by ISS Corporate Solutions released last month painted a picture of greater progress on Black board representation following last year’s racial-justice protests: The number of newly appointed Black board members at S&P 500
companies swelled by almost 200% between July of 2020 and May, and Black individuals made up 32% of newly appointed directors, compared to 54% for white individuals.
“The needle has clearly moved as companies respond to the chorus of investors and other stakeholders who since last summer have called for greater racial and ethnic diversity within corporate boardrooms,” Marija Kramer, head of ISS Corporate Solutions, said in a statement.