The diversification of top-level corporate leadership has been a consistent topic of discussion in recent years. With growing calls to diversify boardrooms, many companies have been forced to reckon with the inadequate representation of their leadership teams. In an effort to monitor trends in this space, Equilar’s Gender Diversity Index (GDI) tracks the number of women serving on Russell 3000 boards on a quarterly basis, with 0.0 representing complete dominance by a single gender and 1.0 representing gender parity. Currently, the Equilar GDI sits at 0.53.
Due to the growing urgency of the public conversation, along with legislative efforts such as SB-826 in California, which mandates gender diversity on public boards, the GDI has made significant progress in the last five years. Collective female representation on Russell 3000 boards has increased steadily quarter to quarter, rising from just 15.1% in Q4 2016 to 26.7% as of Q4 2021. Along with these snapshot statistics each quarter, Equilar’s GDI projects the year during which the Russell 3000 will finally reach gender parity. Because of the ubiquity of this topic in the public sphere, along with the myriad challenges associated with the pandemic, this projection has fluctuated since 2017 (Figure 1).
As of 2017, the Russell 3000 was projected to reach gender parity by 2048. From 2017 to 2019, the rate of female appointments rose considerably, which in turn dragged the parity projection all the way down to 2030. Since then, that figure rose slightly back up to 2032, perhaps partly due to the unforeseen circumstances surrounding the pandemic.
As companies have made concerted efforts to add more women directors to their boardrooms, many have begun to call for the same with respect to ethnicity. In 2020, California passed AB-979, which requires companies to appoint directors from “underrepresented communities,” the SEC approved Nasdaq’s board diversity guidelines for their listed companies, and Glass Lewis recently adopted new proxy voting guidelines to encourage more diversity. While progress on this front has not been as fruitful as it has on the gender side, the coming years may serve to change that fact.
The percentage of total ethnically diverse directors in the Equilar 500 as of the end of Q4 2021 was 21.9% (Figure 2). Of the 21.9%, just 7.6% of those directors were women, a disparity that remained relatively consistent across each ethnic group. Black and African American directors were the most prevalent ethnic sub group in the Equilar 500 with 11% total, while Asian and Pacific Islander and Hispanic and Latino directors each represent about 5% of the Equilar 500.
Unsurprisingly, there is still significant progress that needs to be made. The supply for diverse directors has long outweighed the demand from top companies, a fact that will likely remain true for years to come. Thankfully, recent regulatory and legislative efforts have sought to make a difference and, even if they fail to, public pressure around this issue will undoubtedly endure.