New research about women on US corporate boards shows that women are joining boards at a higher rate and that boards that already have at least one female director are most likely to add more. Of the more than 1,800 directorships currently held by women, nearly 40 percent joined their respective boards in the last five years.
These are welcome trends, as research indicates that companies with more women on their boards outperform those with fewer or no female directors. And yet, to be globally competitive and strengthen board performance and effectiveness, US companies must to a better job of prioritizing board diversity, including putting women in the boardroom.
"Board quality is strengthened when directors have a diversity of skill sets, expertise, experience, and viewpoints that inform strategy development discussions and board oversight processes," said Allie Rutherford, associate director of the Corporate Governance Group at Ernst & Young LLP. "Many boards that have recruited female directors recognize the value and impact that diversity can have on board thinking and function."
Key findings of the report include:
Change has been incremental. Comparing the percentage of board seats filled by women at S&P 1500 companies in 2012 with those from 2006 shows only a three percentage point increase - from 11 percent to 14 percent - over six years. While there are fewer companies with no female directors on their boards today than just a few years ago, this change has occurred at a sluggish pace.
Greatest increases in gender diversity occurred among already diverse boards. Companies with women already on their boards were more likely to add another female to the mix: over 30 percent of companies added at least one female director to their boards since 2006, and, of those, about 60 percent already had at least one woman serving.
Companies are diversifying board members' professional backgrounds. An in-depth analysis of the backgrounds of women joining boards over the past two years shows that boards are not limiting recruitment to former or sitting CEOs. Although current and former public company executives represent the largest professional background category, 80 percent of these are held by women who served in executive positions other than CEO.
Female representation in leadership positions and on key board committees remains low overall. There is still more work to be done, as less than 6 percent of independent board leadership roles are held by women, and women hold less than 16 percent of all positions on key committees (audit, compensation, nominating).
Boards need to be prepared to discuss their composition with shareholders. Some investors are engaging or intend to engage companies that do not have women on their boards through dialogue, letter writing, and shareholder proposals.
SOURCE: Ernst & Young Press Release