Progress slows on path to gender parity in the board room

NEW YORK — Almost extinct are the days when only men sat on U.S. corporate boards. But the speed at which boards have brought more women to the table has slowed, and it’s likely to be a decade before boards are evenly split by gender.

One of every four directors at U.S. publicly traded companies was a woman at the end of last year, at 26.7%. That’s up from 23.5% one year earlier and just 15.1% five years earlier. The numbers come from an analysis by executive-data firm Equilar of companies in the Russell 3000 index, which includes 97% of all investable U.S. stocks.

So progress is continuing, with boards now more than halfway toward potentially having half their members be women. Across the country, women make up 50.8% of the population. But the pace of progress has slowed following big leaps in earlier years.

If changes continue at their current pace, Equilar says corporate boardrooms could be 50% female by 2032. That’s the same estimate it gave 12 months ago, showing progress has been steady. But in earlier years, that projection was rapidly moving toward the present, from 2055 to 2048 to 2034 to 2030, before stalling.

Another recent report from Deloitte said corporate boardrooms around the world could reach gender parity in 2045. That’s an acceleration from its prior estimate of 2052, published three years earlier.

One reason for the still-long timeline ahead might be that the easiest gains have already been made. Only 80 companies had all-male boards at the end of 2021, according to Equilar’s survey, or 2.7% of the total. That’s down from 738 five years earlier, or nearly 25%.

Much of the initial progress happened as companies faced heavy pressure to ensure at least one woman was on their board. In some cases, it was a requirement.

California enacted a law in 2018 requiring publicly held companies with principal executive offices in the state to have at least one female director by the end of 2019, for example.

But boards might see the benefits of having more diversity, rather than just “checking the box” after adding one woman and moving on.

“In the past when I was on a leadership team, I had to really fight to have my voice be listened to, sometimes even at the executive table,” said Mary Zimmer, who retired in 2019 after more than 35 years in the financial services industry. She recently joined the board of Alerus Financial, based in Grand Forks, N.D., and is one of five women on the 10-person board.

Now, she said, well-run companies are heeding the business case for diversity. Increased diversity can only help companies stay in better tune with their customers, who are becoming increasingly diverse themselves. It also sends a message to the company’s workforce that women have career paths upward.

“Oftentimes you get skipped over, and you don’t even know it,” said Zimmer, who said she wanted to join Alerus’ board after appreciating its team-oriented culture.

Investors in companies are also doing their own lobbying, with many saying they want more diversity of thought in the boardroom because it can lead to better performance and bigger long-term gains. More points of view can yield better discussions, preparations and decisions, proponents say.

Research suggests companies with more diverse boardrooms and executive suites tend to have stronger profits and returns over the long term, though researchers caution it’s tough to say definitively whether increased diversity causes the strength or whether better-run companies tend to have more diversity. A recent study by McKinsey said that companies whose boards are in the top quartile of gender diversity are 28% more likely than their peers to outperform financially.

“I spent a lot of my career as the only woman in the room,” said Ann Miletti, who oversees $84 billion as head of active equity at Allspring Global Investments. “You don’t ever want to be seen as the token female, a person placed there so the numbers look good.”

But Miletti, who says the portfolio managers and analysts she oversees consider a board’s gender diversity as they make the complicated decision on whether to buy a stock, said she’s noticed a change in the conversation recently. It’s not only with the CEOs and other executives she talks with at companies around the country. It’s also with the clients whose money she’s helping to invest.

“It’s not about just getting that number,” she said about the drive to increase diversity, “but it’s actually about ‘Why?’ It’s because of performance.”

Here’s a look at the state of gender diversity on corporate boards today, according to Equilar:

  • Women made up nearly half of all the new directors who joined boards during the last three months of 2021, at 47.7%.
  • North Dakota companies have the highest prevalence of female directors out of the 50 states and Washington, D.C. To be sure, North Dakota had only five companies in Equilar’s survey versus the 521 from California. But 39% of all the board seats at North Dakota companies were filled by women. California had 31.9%.
  • Alaska and West Virginia were at the other end of the spectrum, with 16.7% and 19.5% of board seats occupied by women, respectively.
  • Bigger, more valuable companies tend to have more female directors, perhaps because they’re also usually under more scrutiny. Among companies with a market value of greater than $10 billion, 29.7% of directors are women. That compares with 27.2% for companies worth between $2 billion and $10 billion. For the smallest companies, it’s 24.3%.
  • Utility companies tend to be the most likely to have women on their board, with 31.1% of their directors female. Companies that sell products directly to consumers also are more likely to have more women on their boards than others, with roughly 30%.
  • Energy companies tend to have the most male-dominated boards. Only 22.3% of directors at these companies are women.