August 7, 2018 – In a significant shift from a year earlier, women have made substantial progress in the boardroom, according to Heidrick & Struggles‘ 2018 Board Monitor Report. The report found that women accounted for 38 percent of incoming board directors at Fortune 500 companies, a substantial rise from the previous year’s 28 percent.
The findings suggest that boards are finally making gains in gender parity. This is the largest percentage of women among new directors since the data was first tracked in 2009, up from 27.8 percent in 2016 (which at the time ended a seven-year run of year-over-year gains in female director appointments). Extrapolating data for 2017 using a three-year trailing average method, Heidrick & Struggles projects that women will have parity with men in new appointments by 2025.
“This latest research indicates that boards are taking action to make significant progress toward gender parity, contributing to the dramatic spike we saw in women director appointments,” said Bonnie Gwin, vice chairman and co-managing partner of the CEO & board practice at Heidrick & Struggles. “While we’re optimistic about this improvement from last year’s report, there is still more work to be done to improve gender diversity in the boardroom.”
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Jeff Sanders, vice chairman and co-managing partner of the CEO & board practice at Heidrick, said the Board Monitor findings align with the many conversations the firm has had with clients, who are increasingly seeking diverse talent to bring fresh perspectives into their boardrooms. “We are encouraged that this latest data shows an acceleration toward greater representation of women on boards,” he said. “As companies look beyond the ‘usual places’ to fill open seats, they are refreshing their boardrooms to be more reflective of today’s workforce and marketplace.”
Despite improvement in appointments for women, gender composition on boards overall has only improved slightly. The overall percentage of women on Fortune 500 boards rose to just 22.2 percent in 2017, up 1.2 percentage points from the previous year. This data indicates that most new female director appointees were replacing other women who had left their board roles.
- The share of new board appointments that went to African-Americans rose from nine percent in 2016 to 11 percent in 2017, the largest increase ever in that category.
- The share of new board appointments that went to Hispanics remained at six percent, the high it first reached in 2016.
- Asians and Asian-Americans board appointments remained at six percent, the same as in 2016.
- One Native American was appointed in 2017, the first in the nine-year history of Board Monitor.
Beyond this year’s data showing an upsurge in appointments of women and modest gains in racial and ethnic diversity on boards, additional findings suggest that the pressure in recent years to bring new perspectives to boards may be bearing fruit:
- Almost 36 percent of new board appointees in 2017 had no previous board experience, up from 25 percent in 2016.
- While the total number of board seats has declined over the past five years, from a high of more than 5,300 in 2012 to 4,747 in 2017, the percentage of seats held by newly appointed directors overall has generally been trending upward: 7.5 percent in 2017, nine percent in 2016, and 8.5 percent in 2015, after having never risen above seven percent in previous years.
- Current and former CEOs accounted for 47 percent of director appointments in 2017, down from 50 percent in 2016, 54.4 percent in 2015, and well below the high of nearly 55 percent in 2013, suggesting that boards are beginning to look beyond their traditional first choice of CEOs to fill vacant seats.
- Some 72 percent of newly appointed directors in 2017 had international experience, an increase of 11 percentage points over the previous year. Financial experience remains in great demand.
- As in the previous two years, financial services know-how was the most widely distributed career experience among newly appointed directors, representing almost 24 percent of their collective mix of career experiences.
- Those financial services experiences were widely distributed, with 30 percent going to industrial boards, 25 percent to financial services boards, 19 percent to consumer boards, 10 percent to business services boards and 10 percent to technology boards.
- Of all the significant career experiences newly appointed women brought to boards in 2017, 25 percent were in financial services, far outpacing business services, consumer and industrial experience, each of which represented 18 percent of their collective career experiences.
Global Boards Step Up Efforts to Broaden Roles for Women
Australian cabinet minister for women, Michaelia Cash, has called for a stunning new target of 50 percent for female representation across all of her country’s government boards. The current gender diversity target stands at 40 percent.
Getting Women On Boards
Sylvie Vercruysse, managing partner with EMA Partners Belgium, which is based in Brussels, said that one of the biggest challenges women face in getting onto boards is simply for everyone involved to come to know one another better. “This comes from two sides,” said Ms. Vercruysse, who is a member of Women on Board-Belgium, a non-profit association in support of female access to director roles. “The boards have to know that there are capable and suitable women for board positions and the women have to get to know the world of board members. In a way it is a state of mind. Especially men, and the society at large, need an increased awareness of the fact that women on boards lead to better performance, to better quality of debates and to better governance.”
“Another challenge is that is takes time for women to gain experience in companies and to climb the ladder in order to be ready for the board level,” she said. “This should phase out in time.”
Limitations for board memberships must be addressed, Ms. Vercruysse said. Yet it is more than just a women’s issue. “One could argue that these restrictions should be loosened, not only to attract more women but also because currently there is a tendency to attract younger people to the board in order to be able to cope with disruptive technology and digitalization, which are not always the core competencies of the average experienced board member,” she said. “Very often, these younger people do not necessarily have CEO experience.”
Further, greater efforts must go into getting women into CEO roles, which broadens their presence in the daily workings of companies, and society. “We have to make sure more women are growing to the top and get CEO-positions because parity is not only necessary on board levels but also on CEO-level and other levels in a company,” Ms. Vercruysse said.
Related: Women Remain Lacking in the C-Suite
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; Stephen Sawicki, Managing Editor; and Andrew W. Mitchell, Managing Editor – Hunt Scanlon Media