What is Driving Gender Diversity on Boards?

October 20, 2017

As discussed in our last Farient Brief, the percentage of women directors in the S&P 500 has climbed from 16.9 percent in 2010 to 22.2 percent at the end of fiscal year 2016. Unlike initiatives in European countries where quotas have been legislated, in these U.S. companies change has been driven by pressure by investors and organizations, like 2020 Women on Boards, 30% ClubWomen Corporate Directors and Catalyst Inc, to name only a few. What dynamics underlie this change? Is the increase a result of men being replaced or new board seats being created?

“The increase in the number of directors on S&P 500 boards since 2010 has provided a way for companies to improve gender diversity on boards without displacing incumbent men. But as growth slows and the call for increased gender diversity on boards continues, we are likely to see tough decisions made as replacement becomes necessary to further the diversity agenda.” Zanvi Patel, Partner, Farient Advisors

The data shows that gender diversity on S&P 500 boards has been primarily achieved by increasing the size of boards and placing women in many of the new seats. Since 2010, the average size of boards has increased from 10.28 to 11.16, representing 445 additional directorships with women gaining 390 seats versus men’s 55 seats. Of course, there must be some replacement of male directors with women, but as far as driving the shift, replacement does not appear to be the main catalyst.

The data used in the analysis is through the end of fiscal year 2016, but a meaningful move on gender diversity on boards is being seen in 2017. Since January, women have a net gain of 62 additional board seats while men have lost 56, increasing the percentage of women on boards in the S&P 500 to 24.4 percent. If we end 2017 here, it will be the largest reduction of male directors during the time period analyzed and will result in a decrease of male directorships from 2010.

The U.S. is making progress, but at this rate and without a mandated target, how long will it take for companies to reach a 30, 40 or 50 percent milestone? Farient modeled the answer to this question, which will be featured in our next brief.

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Gender Diversity on Boards


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