Board diversity progress ‘slow & insufficient’ worldwide

Global leadership expert Egon Zehnder has reported ‘slow and insufficient’ board diversity progress worldwide, and is urging companies to take action.

Although 23.3% of board positions are now held by women, it’s just a slight improvement from 20.4% in 2018, and still far from parity, reveals Egon Zehnder’s 2020 Global Board Diversity Tracker. Black directors make up just 4.1% of all US directors in the Russell 3000 index. And, in the UK, 37% of FTSE 100 companies surveyed don’t have a non-white corporate director. Furthermore, only 24 out of the 5,000+ board seats in the Fortune 500 index are filled by openly LGBTQ+ individuals.

So plenty of room for improvement. While there is some progress mainly in gender diversity globally, the rate of change on diversity on boards is insignificant. Despite increased attention to diversity and inclusion given the recent global events, making tangible progress is still challenging, according to the company that has been tracking gender and diversity on boards globally for the last 16 years.

GENDER DIVERSITY BOARD PROGRESS

Gender diversity on boards is making some progress albeit slowly. Women now make up 27.3% of all board committee leaders globally, up from 25.5% in 2018, reveals Egon Zehnder’s tracker. However, women comprise just 2.1% of all board chairs, up from 1.5% in 2018. 

Globally, new board appointments made up 13.5% of all board positions in 2020, up from 11.4% in 2018. Of that number, 30% were women, up from 27% in 2018. In reality, this means that only 4% of all directors new to the board are women – that’s just a 0.9% increase from 2018. Additionally, 25 countries in the study this year, including China, Brazil, Germany, and the United States, are still home to large companies with no women on the boards.

However, there is some progress. Around 89% of major companies have at least one woman on their board, up from 85% in 2018. And 18 countries, up from 13 in 2018, have on average three or more women on the boards of their largest companies. Eight of the 18 countries averaging three or more women on their boards have quotas or regulations in place requiring the hiring of women. Switzerland is the most recent country to add a quota.

UNLOCKING POWER OF DIVERSITY

While progress continues toward gender diversity, the next few years are critical to unlocking the power of diverse thinking. The focus now appropriately, looks to address ethnic and racial diversity. For example, in the United States, Black directors make up just 4.1% of all directors in the Russell 3000 index. Many companies have now pledged to increase that figure. In the UK, the Parker Review Committee, a non-profit executive group, set a target for FTSE 100 companies to have at least one non-white corporate director by 2021 and for the FTSE 250 to do the same by 2024. As of early 2020, 37% of the FTSE 100 companies reporting results revealed that companies still have work to do to meet those targets, as just 54% of FTSE 250 companies had reached that goal.

Furthermore, only a tiny fraction of board seats in the Fortune 500 index are filled by LGBTQ+ individuals. In 70 countries, being openly LGBTQ+ remains illegal. However, even in the US, where many protections have been implemented for LGBTQ+ individuals, just 24 of the more than 5,000 board seats in the Fortune 500 index are openly LGBTQ+, according to Out Leadership. Of that tiny number, only two are people of colour, and zero are women of colour.

FRUSTRATION WITH LACK OF ACTION

Slow, but steady attention to board diversity combined with this year’s powerful social justice movements means that there is now the will to act. “The recent news on Nasdaq’s new proposal for board requirements is a tangible sign of the increased conversation,” noted Pamela Warren, Co-Lead of the Firm’s Global Diversity, Equity and Inclusion Council. “There’s a heightened awareness of the need for change, and a growing frustration with the lack of action.”

According to Jim Fitterling, CEO and Chair, Dow Inc. “When people come to work, they need to feel like they have a chance for advancement. If they don’t see themselves in middle management and upper management of a company, and if they don’t see it on the board, they struggle to feel they belong.”

Many other leaders across various industries believe the time for change is long overdue. “I think we need to acknowledge that the conversation we are having today should have happened 20, 30, 40 years ago. Shame on us that it did not happen then, but now we have the opportunity to drive the necessary changes going forward,” stated Enrique Lores, CEO, HP Inc. “We have an obligation to create a better world for our employees, for our companies, for our kids.” 

Kathleen Taylor, Chair of Royal Bank of Canada, agrees: “You need to be representative of the communities you serve. The tragic killing of George Floyd really ignited a spark for greater racial equity.”

BOARD DIVERSITY ACTION PLAN

“Today, we see attention and acknowledgement that we need more diverse boards. However, diversity spans far beyond gender. It is now more important than ever to move beyond traditional D&I metrics – and prioritise building teams that are representative of all different backgrounds,” stated Jill Ader, Chairwoman of Egon Zehnder. “Board leaders have the power to modernise governance with a few bold steps. Change is within our grasp.”

How? Egon Zehnder believes there are several long-term and short-term actions to take in order to successfully make a difference in terms of diversity. They include: 

• Champion change from the top – instead of shaming executives, it’s important to transform criticism into an opportunity to learn new behaviors.
• Inclusion matters – diversity promotes exchange, even disagreement, and therefore encourages new ways of thought.
• Power through numbers – minority voices go unheard when a dominant majority remains.
• Pick for potential – curiosity, engagement, insight, and determination are key leadership traits.
• Expand the network – look beyond close connections and intentionally expand networks to include people who bring different perspectives and experiences. 
• Build the pipeline for others – hold the CEO accountable to diversity commitments to ensure sustainability of intent.
• Ride the wave – take advantage of the current conversation to learn from new perspectives.

This year’s report analysed data from 1,685 companies across 44 countries with a combined market capital of more than $48 trillion. For the first time in this report, Egon Zehnder has expanded its scope to address additional sectors of diversity, offering case studies with directors, chief executives and chairs to discuss the inclusion of ethnicity, sexual orientation and other perspectives in the boardroom. Click here for more information.