Boards of directors are becoming more diverse, which is considered a positive for allowing different voices to be represented and to help lead U.S corporations. But despite advances, there is still progress to be made.
“You get better decision-making with people of different genders, races and ages,” said Stephanie Resnick, who specializes in corporate issues at the law firm of Fox Rothschild LLP. “You are thinking of things you wouldn’t if it was homogenous. There are many approaches to a problem.”
But, “while we are making progress, we have not yet gotten to the place we should be,” Resnick said.
Indeed, “you have to make sure it’s not a token person of a different gender or race,” said Tina Shah Paikeday, a consultant at executive search firm Russell Reynolds Associates. “It also has to be a case of the majority having an open mind.”
Consumer robotic products maker iRobot, the offerings of which include robotic vacuums, prides itself on its board’s diversity. The eight-member board has three women, one Asian male and a South American Muslim male, all of whom participate, said Colin Angle, CEO of iRobot.
“It brings different business skills and ethnic and gender perspectives,” Angle said. “With different groups what we think about our products is different. It makes for livelier and broader discussions.”
The board’s diversity is also a plus for employees who see they work in an environment that welcomes diversity, Angle said.
Boards of S&P 500 companies appointed 397 new independent directors in the 2017 proxy year, the highest number since 2004, and for the first time just over half (50.1%) of the new directors were women and/or minorities (compared with 42% in 2016), according to a study by executive search firm Spencer Stuart.
A record-breaking 45% of the incoming directors were serving on their first outside corporate board. And while the number of first-time directors is at an all-time high, the number of S&P 500 CEOs who serve on one or more boards is at a record low of 37%, a decrease from 52% 10 years ago.
The research found:
- Female representation among new S&P 500 directors rose to 36% (142 directors), the highest since Spencer Stuart began tracking these data in 1998. Meanwhile, minority males (defined as African-American, Hispanic/Latino or Asian) made up 14%, or 57, of the new independent directors. Six percent, or 25, of the new directors were women and minorities.
- Despite the record number of new female directors, the percentage of women on S&P 500 boards increased only incrementally to 22% of all directors, up from 21% in 2016 and 17% in 2012. This is due in part to modest director turnover. Forty-eight percent of boards did not appoint a new director in the 2017 proxy year.
- For the first time, more than half (51%) of S&P 500 boards have a separate chair and CEO.
- Directors with financial backgrounds are in demand, representing 29% of the new S&P 500 directors in 2017, up from 19% in 2007.
Jillian Manus, managing partner at venture capital firm Structure Capital, who sits on several boards, sees progress but is not overly impressed. “This does mean more transparency and accountability,” Manus said. “but how is it going to cause systemic change going forward?”