As reported in the Equilar Gender Diversity Index (GDI), it would take nearly 40 years to reach gender parity on Russell 3000 boards. While companies are slowly but surely adding females and other diverse directors to their boardrooms, in others, there is little accountability and responsibility being taken.
At the recent Board Leadership Forum, co-hosted by Equilar, NACD and Nasdaq in San Francisco, a panel of investors and governance professionals looked deeper at these issues to provide perspective on what expectations are for the board and how they can take steps to engage with shareholders around diversity.
A recent study conducted by the Stanford Rock Center for Corporate Governance and The Miles Group found that 57% of directors agree that their board is effective in bringing new talent—while that is a majority, it means that 43% felt they were not. Meanwhile, only one-third of respondents said they were positively planning for turnover. If that’s the case, panelists posited, what message does that send to investors?
Major institutional investors represented at the Forum suggested that boards can keep this topic at the forefront by showcasing diversity in the proxy statement, even if it’s not required to be disclosed. That, alongside a skills matrix or other disclosure that represents the variety of viewpoints and experience directors are bringing to the boardroom, opens the door for shareholder engagement around this issue because it helps investors have a window into how the board is composed.
But overall, the panel agreed that despite some of the rhetoric out there, boards are not clamoring for more diversity as a general rule. The numbers are slow to increase because there is not enough commitment to change at a broad level, they said, and it will take strong efforts from investors and other governance advocates to prove to them they need fresh faces in the boardroom.
The fact of the matter is that there is not a supply problem when it comes to diverse candidates. “There are more qualified people available for board positions than there are positions available,” one investor noted. “The problem is being able to tell the current members when it’s time to leave.”
Dan Marcec is the editor-in-chief of C-Suite. He can be reached at dmarcec@equilar.com.
Steven Borden
Borden Media Consulting
Catherine Bromilow
PwC’s Governance Insights Center
John Cabeca
United States Patent and Trademark Office
Chris Clark
National Association of Corporate Directors
Cindy Fornelli
The Center for Audit Quality
Matthew Healy
Nasdaq
Jan Koors
Pearl Meyer
Paula Loop
Ron Schneider
Donnelley Financial Solutions
Will Thiessen
J.P. Morgan Securities LLC
Derek Zaba
CamberView Partners