Why Can’t Boards Achieve Diversity?

Here is the lede from this WSJ article: “A stubborn paradox reigns across U.S. boardrooms: Companies are appointing more women to board seats than ever, yet the overall share of female directors is barely budging.” In comments to the WSJ, the managing director for corporate governance research at the Conference Board indicated that, in “the last two decades, there’s been a sweeping revolution in the field of corporate governance…. Yet if you look at the composition of the board, at its core, it remains the same at many public companies and quite resistant to change.’” Why is that? It’s not, as some have suggested, a lack of qualified women board candidates. Rather, according to the Conference Board, it’s that “average director tenure continues to be quite extensive (at 10 years or longer), board seats rarely become vacant and, when a spot is available, it is often taken by a seasoned director rather than a newcomer with no prior board experience.

”According to a new study from the Conference Board, looking at SEC filings in 2018, half of the Russell 3000 and 43% of the S&P 500 companies did not disclose any change in board composition. With low board turnover, the opportunities for increasing board diversity are necessarily more limited. As reported in the WSJ, the study found that, for companies in the Russell 3000, “the average director stays in the job for 10.4 years and about a quarter of them step down only after 15 years. The upshot is that boardrooms remain the preserve of older, mostly white men: Only 10% of Russell 3000 directors are 50 or younger, while about one-fifth are older than 70….” According to the study, the industries with the longest average director tenures were financials (13.2 years), consumer staples (11.1 years) and real estate (11 years). But even the shortest average tenure was just over eight years (healthcare industry).

Source: The Harvard Law School Forum on Corporate Governance and Financial Regulation | The leading online blog in the fields of corporate governance and financial regulation.

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