More than one-quarter of board seats in the Russell 3000 now belong to women, according to a new report from Equilar. This is an increase to 25.2 percent from 15 percent just five years ago. The Equilar Gender Diversity Index (GDI) has crossed the halfway mark for the first time. It reached 0.50 as of June 30, 2021, where 1.0 represents gender parity on Russell 3000 boards.
Making strides towards gender parity
Nearly 47 percent of directors added to boards in Q2 were women. In addition, the number of boards that have reached gender parity jumped 20 percent in Q2 2021. This is up from 70 to 84. The number of boards represented by 40 percent to 50 percent women increased 11.8 percent from 186 to 208. Put another way, approximately 10 percent of the boards across the entire index now have at least 40 percent women. Furthermore, the number of boards with zero women fell to 118, or 4.1 percent of the Russell 3000, which was down from 4.9 percent in Q1.
“Importantly, the number of new male and female directors added in Q2 is almost at parity,” said Susan Angele, Senior Advisor, Board Governance at The KPMG Board Leadership Center. “The key to continuing progress is for boards to avoid a ‘one and done’ approach and insist on a diverse slate including a mix of qualified candidates across gender, race, ethnicity and sexual orientation for every board search, not just those categorized as ‘diversity searches’.”
More work to be done
Still, women have a long way to go to reach parity. One major issue holding back the increased prevalence of women on boards is their ability to access the pipeline leading to director positions. There are thousands of qualified women in the current workforce. However, a narrow perception of what it means to be “board-ready” often limits the recruitment process.
“Progressive and ultimately sustained board gender diversity requires that workforce diversity also improves,” said Hannah Orowitz, Senior Managing Director, Corporate Governance at Georgeson. “The focus on workforce diversity as a key issue over the last year has led companies to develop strategies and initiatives to increase diverse representation in senior positions, which will further expand the pipeline of board-ready women.”
For example, the number of women in C-suite positions continues to rise. However, they are often in roles that are not as commonly sought after for board experience. Just 5.6 percent of CEO positions in the Russell 3000 belonged to women in 2021. Additionally, 13.7 percent of CFO positions belonged to women in 2021. These figures have risen over the past 10 years—from 2.7 percent of CEOs and 10.3 percent of CFOs in 2012. However, that pool of candidates remains limited.
What’s holding women back?
The C-suite roles women most commonly hold at Russell 3000 companies are human resources, administration, GC/chief legal officer, marketing and accounting. In 2021, more than 60 percent of chief human resources officer (CHRO) roles in the Russell 3000 belonged to women. This is up from 38.3 percent in 2012. This by far outpaces the role with the next largest share. Women held 39.2 percent of the chief administrative officer roles in the Russell 3000 in 2021. That number is more than doubled from 19 percent in 2012.
These trends may indicate why women executives are not necessarily on the fast track to achieve board positions. The move to a CEO position from CHRO or GC isn’t as common as from the CFO or COO. If women continue to be limited to certain roles within the C-suite, that will impact their ability to ascend to the top corporate position. It will also impact their ability to contend for sought-after board roles in mid-career as well as after retirement.
Board diversity continues to be a fraught political topic. Nasdaq’s recent proposal to the SEC, approved on August 6, 2021, is likely to have an outsized impact on board diversity initiatives in a way that previous legislative mandates have not achieved completely. These developments, along with other external pressure on boards from key stakeholders, could certainly accelerate the pace of women on boards in the near future.
Check out these resources to help create gender diversity in the boardroom.