A few more good women? Slow progress on gender diversity in the boardroom

March 22, 2022

Latino Corporate Directors Association

In Diligent Institute’s recent paper, A Few Good Women: Gender and Leadership in the Boardroom, we set out to learn whether levels of female representation on boards and in boardroom leadership were on the rise. Our findings suggest that the overall female inclusion is currently at 29%, compared to 27% in 2021 using the same countries in our sample, a two percentage point increase. Our data also indicated that women are likely to hold more board seats relative to their male counterparts.

Are boardrooms appointing the same group of women?

Boards may be tapping the same small group of women for board seats. 52% of female directors hold more than one listed board position, compared to only 36% of male directors. 

Despite our finding that levels of female representation in boardrooms is growing, the report also found that women are likely to hold more board seats compared to their male counterparts. Given the fact that male directors are more likely to be appointed to the board from executive positions in the c-suite because there are more men in C-suite positions compared to women, this result is not surprising. From there, it’s possible that the women who do manage to crack into the boardroom are more likely to be tapped again rather than the board searching for a board-ready female candidate, who is already more likely to be from outside the C-suite. This theory is supported by our  findings: 87% of female directors in our sample had nonexecutive expertise compared to 77% of their male counterparts.

Recently, the United Kingdom celebrated a great milestone: The UK climbed second in the international rankings for women’s representation at the board level. Almost 40% of UK FTSE 100 board positions are now held by women, compared with 12.5% just ten years ago. And there are almost 38% women on board across the FTSE 350. While this is a great achievement, our data also suggests that 63% of female directors in the FTSE 350 hold more than one board position compared to only 44% of male directors.

Here, the actionable item is to push for greater gender diversity in the c-suite, which is the pool that directors often come from, similar to movements at the board level. The 40% target for women at the executive committee level in the FTSE 350 is a step in the right direction. Only 25% of executive committee members are women now according to their research. Nomination committees also need to expand their pool of search and give more female first-time board directors a chance on their boards.

Women likely to bring more diverse backgrounds to boardrooms

A slightly higher percentage of female directors have technology experience compared to male directors, at 8.2% relative to 7.7% respectively.  Additionally, female directors are twice as likely to have sustainability experience compared to their male counterparts.

Overall, the differences in skillset backgrounds between male and female directors suggest that female directors are more likely to bring non-traditional expertise backgrounds compared to men. In Diligent Institute’s report published in July 2021, Beyond the C-Suite, the research indeed supported that female appointees to the boardrooms are likely to bring less traditional skills such as Human Resource, ESG, Technology, and Marketing backgrounds to the boardroom. Boardroom discussions are getting more complex, and having people with these skills in the boardroom has become necessary to see existential issues from all sides. In general, boards should look more like the consumers they serve, and bridging the skills set gap could be one of the areas to achieve that.

Japan, a new paradigm in diversity discussions

This year, the Institute partnered with HR Governance Leaders (HRGL) in Japan to shine a light on the journey toward more diverse boardrooms in that country. Corporate governance, sustainability, and managing capital inflow have been on the radar of many Japanese companies for a long time. However, things seem to be on the verge of change with the recently revised corporate governance code. As expected, the aim of the revised code is to reinforce corporate governance pillars on diversity, independence level, and climate change as it relates to environmental, social, and governance (ESG) goals. The revised Corporate Governance Code in Japan reflects the global changes in shareholder interest, which now includes the requirement of increased diversity of boards, a higher proportion of independent directors, and transparent disclosure around sustainability. The recommendations that the updated Corporate Governance Code defines, along with the new requirements of the Companies Act, may help companies improve their governance and competitiveness.

Most of the Nikkei 225 companies have already achieved some progress in these areas, but the introduction of the new regulation will accelerate the improvements across the Japanese market. Investors and shareholders may benefit from the more structured meetings, easier access to documentation and the possibility for a fluid dialogue with the companies. In many ways, diversity on boards in Japan has had slow progress because of the patriarchal society that Japan has but with this great momentum, we are likely to experience a tremendous shift in that regard.

Good governance doesn’t just call for opposing ideas in the boardroom, it calls for diverse members to bring in those alternative perspectives. When diversity is encouraged, it benefits the organization overall and all other stakeholders.

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