As the focus on diversity across Corporate America continues
to sharpen, the number of women serving as board members at the largest U.S.
companies has risen steadily. Featured in the Associated Press’ coverage of
International Women’s Day 2022, the most recent edition of the Equilar Gender
Diversity Index (GDI) revealed that 26.7% of Russell 3000 board seats were held
by women as of the end of Q4 2021, a modest increase from the 26.1% as of Q3
2021. As a result, the needle on the Equilar GDI inched forward from 0.52 to
0.53, with 1.0 representing complete gender parity.
One year earlier, women held 23.5% of board seats, and five
years earlier, that figure was just 15.1%. Several factors, led by various
stakeholders, have contributed to the push for diversity on boards in recent
years. With the passage of bills like SB-826 and AB-979, California provided a
template for states and other institutions looking to encourage corporate
diversity. While similar laws have yet to come to fruition in many other states
and are unlikely to pass at the federal level any time soon, the SEC’s approval
of Nasdaq’s board diversity listing rules last year signaled a potential future
for more widespread diversity requirements.
The rule requires most Nasdaq-listed boards, other than
exempt entities and companies with boards consisting of five or fewer members,
to have at least one woman in addition to at least one member of any gender
from underrepresented groups defined by race, ethnicity or sexual orientation.
In lieu of compliance, Nasdaq-listed companies can explain why they cannot or
will not meet these requirements in public disclosure. The Nasdaq requirements,
along with increased scrutiny from institutional investors and new guidelines
from proxy advisory firms, will require companies to be transparent when
discussing the composition of their boards.
According to Brigid Rosati, Managing Director, Business
Development and Corporate Strategy, at Georgeson, such transparency requires
proper disclosure of diversity information. “Many investors have turned their
attention to diversity disclosure as a way to assess board composition and
measure progress on board diversity,” said Rosati. “Companies should expect to
see investor demand for enhanced board diversity reporting and workforce
diversity data.” While the abundance and nature of diversity laws and
regulations may change in the coming years, further progress will require a
transparent, thoughtful and comprehensive approach.
Along with the snapshot statistics of female directorships
each quarter, Equilar’s GDI projects the year during which the Russell 3000
will finally reach gender parity. Due to the ubiquity of this topic in the
public sphere, along with the myriad challenges associated with the pandemic,
this projection has fluctuated in the past several years.
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 down to 2034 as of
2018. 2019’s projection was the most optimistic, with parity expected by 2030.
Since then, that figure rose slightly back up to 2032 in 2020 and remained
there in 2021. This may be due in part to the unforeseen circumstances
surrounding the pandemic, as well as a growing focus on improving in other
forms of diversity besides gender.
The increase in overall female representation was not the
only positive trend observed over the past quarter. Perhaps the most
significant development during Q4 was an increase in the number of Russell 3000
companies to reach gender parity. At 103 companies, this is the first quarter
in the recorded history of the GDI in which more than 100 companies have
achieved equal representation of male and female directors. While this is still
a meager figure in the grand scheme of the Russell 3000, it is a vast
improvement from the 21 companies to have achieved this feat in Q4 2016.
In addition, Q4 2021 also became the first quarter when the
number of boards to reach parity eclipsed the number of boards with zero women
directors. Completely male-dominated boards fell from 96 in Q3 to just 80 in
Q4. Ideally, it will only be a matter of time before this figure hits zero;
however, the fact that so many companies have yet to appoint a single female
director highlights the work that remains. “These companies should prepare to
explain the lack of female directors to their shareholders this coming AGM
season,” said Rosati. “Many of these companies will be deemed laggards and
likely receive shareholder opposition to directors on the nominating
While the Russell 3000 as a whole remains just over halfway
to gender parity, the makeup of newly appointed directors paints a more hopeful
picture. During Q4 2021, 45.5% of open board seats were filled by women, tying
a record number set in Q3 of last year. This figure may not be sustainable in
the path toward overall gender parity, but it is an improvement from the 44.2%
of new seats filled by women in Q4 2020 and the 21.4% in 2016.
Progress is also not limited to the boardroom. According to
an Equilar study featured in CNBC’s TechCheck, the growth rate of women in
Russell 3000 executive leadership roles accelerated to an average pace of 6.9%
from 2016 to 2021, up from 3.8% in the prior five years. Due to this increased
pace, women held 14% of named executive officer (NEO) roles in 2021. While this
figure is still quite low, it represents steady progress from a decade ago when
women held just 8% of these positions in 2010. It’s become evident that
companies are making a concerted effort to drive diversity across all levels of
A significant roadblock in the march toward equal
representation is the disparity between men and women directors who serve on
multiple boards. In Q4, 25.6% of women in the Russell 3000 served on more than
one board, in comparison to the 17.1% of men who were multi-boarded. While the
women who earn multiple directorships undoubtedly do so by the merit of their
professional credentials, this consistently high figure highlights potential
issues for the framework of many diversity initiatives.
“The pipeline of female candidates is strong and
increasingly inclusive as women of color and openly LGBTQ+ women continue to
gain visibility as board candidates,” explained Susan Angele, Senior Advisor of
Board Governance at KPMG’s Board Leadership Center. “Boards are less frequently
insisting on recruiting only from the ranks of CEOs and CFOs and instead are
building boards with diverse sets of experiences to bring new lenses to the
boardroom discussion, such as technology, culture, ESG, talent, crisis
leadership and public policy expertise, among others.”
There is no shortage of highly qualified female candidates
for board positions, but many companies are consistently choosing to pull from
a very small pool of candidates. Despite a lack of progress up to this point, Angele
points to a potentially positive trend on this issue. “The number of
organizations committed to helping raise the visibility of talented first-time
board candidates in order to connect relevant openings is continuing to grow,
and this movement is slowly but surely making an impact,” said Angele.
Unsurprisingly, there is still significant progress that
must 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, progress continues to be made across the board, albeit at varying
speeds. Stakeholders remain optimistic that recent regulatory and legislative
efforts will help achieve their goals in the long run, but Equilar’s GDI
reflects mostly positive returns in the short run.
Amit Batish, Editor-in-Chief of C-Suite and Director of
Content at Equilar, authored this article. Brendan Cullen, Forrest Rouleau, Leo
Rubenstein and Kelly Stangl contributed data and analysis.
The Equilar GDI reflects changes on Russell 3000 boards on a
quarterly basis as cited in 8-K filings to the SEC. Most indices that track
information about board diversity do so annually or even less frequently,
sometimes looking back more than a full year by the time the information is
published, and typically with a smaller sample size. While this data is
reliable and accurate, the Equilar GDI aims to capture the influence of the
increasing calls for diversity from investors and other stakeholders in real
The Equilar GDI is powered by Equilar BoardEdge, a database
of more than 1 million public company board members and executives. BoardEdge
includes exclusive features that show how board members and companies are
connected to each other, as well as the Equilar Diversity Network (EDN), a
“registry of registries” of board-ready executives from leading ethnic and
gender diversity partnerships, organizations and publications.