Women and people of color were picked for a majority of open S&P 500 board seats this year for the first time, due in part to pressure from investors to improve gender and racial disparities.
“It’s a step in the right direction, for sure, and it’s the first time we’ve gone over 50 percent,” said Julie Daum, who heads the North American board practice for executive recruiter Spencer Stuart, which did the survey. “Boards are looking for people who are younger and with different skill sets and that does open the boardroom for more women and minorities.”
Of 397 independent director slots open in the 2017 proxy season, 36 percent went to women and 20 percent to minorities, according to Spencer Stuart, which has tallied boardroom demographics for 30 years. While the tally includes most board seats, it leaves out executives who are also directors of their companies. Combined, women and minorities made up 50.1 percent of the new board members, compared with 42 percent last year, the data showed.
Investors including BlackRock Inc. and State Street Global Advisors this year boards to add more women and minority candidates by voting against hundreds of directors at companies perceived as not taking sufficient steps to improve diversity. In addition, growing claims of sexual harassment against prominent business leaders have increased the focus on putting more women in positions of power to avoid conditions that lead to a hostile workplace.
Even with the gains, the low rate of turnover on corporate boards makes progress slow. Fewer than one seat on each S&P 500 board, on average, changed hands last year. With so few openings, women overall crept up to 22 percent from 21 percent of board representation in 2016 and minority directors rose to 17 percent from 16 percent, Spencer Stuart said. The percentage of Hispanic directors fell to 4.3 percent this year from 4.6 percent last year as black and Asian percentages rose slightly.
Directors may be reluctant to leave because they’re well paid. Average director compensation rose 1 percent to $288,909 this year. That compares to the U.S. median income of less than $60,000 a year. Also, for the first time, more than half of boards with a mandatory retirement age have set the limit at older than 73 on average, giving directors more time to serve in the future.
Boards also still prioritize candidates who have been a CEO or a director at another company, putting women and minorities at a disadvantage because they’re significantly under-represented in those roles, according to a survey this year by Deloitte.
Only 16 percent of the 300 directors surveyed by Deloitte said the lack of diversity among candidates was a top recruiting challenge. On the other hand, more than 90 percent said greater diversity is a priority and would improve the performance of their companies.
“There’s still just very little turnover, so even though the percentage of new directors that are younger and that are diverse has gone up, it’s off a low base,” Daum said. “There’s a high degree of interest in diversity, but it’s still very slow change.”