A Few Good Women: Gender and Leadership in the Boardroom

| Edna Twumwaa Frimpong

Women In Board Leadership: Where Do They Stand?

In the last decade, increasing gender diversity has been a prominent issue for boardrooms across the globe. As companies faced increasing pressure from regulators, investors, and other stakeholders to appoint more female directors, slow progress has been made, to the point where some boardrooms in Europe are now nearing gender parity, on average. The questions remained: Has this progress continued? What happened to female board directors once they were appointed?

In 2020, the Diligent Institute set out to answer these questions. We wanted to know not only how the percentage of female directors was changing but also to learn more about these women’s journeys once they were on a board. Did they assume leadership positions as quickly as their male counterparts? Did they join and chair committees at similar rates? How do their average ages and tenures compare to those of male directors? In 2021, after an unprecedented pandemic and social unrest forever changed the way we think about the role of business, we wanted to see if any progress had been made. Now, after two years of living through a pandemic that has disproportionately affected working women, we want to see whether female leadership in the boardroom has maintained or managed to gain any momentum.

Methodology

In our 2022 edition, we expanded the data to include Japan, which has influenced many of our averages, and included a spotlight on gender diversity for Japanese companies, courtesy of the Human Resources Governance Leaders (HRGL) of Japan to shed light on how this issue is evolving in different parts of the world.
We reviewed 5,482 public companies in Australia, Japan, the European Union (EU), the United States (US), Canada, and the United Kingdom (UK). The research draws comparisons and trends between 2021 and 2022. The year-to-date data was drawn up to January 31, 2022. For the historical years, the data considers the board standings as of December 31 of
the respective year. The report concludes with a selection of director interview quotes from Better Boardroom Initiative’s extensive qualitative study on the benefits of boardroom diversity

Key Findings

  1. The average female representation in the boardroom is increasing in many regions globally. Overall, women occupy about 26% of board seats. Despite this momentum, average female representation on boardrooms in continental Europe still lags the quota proposed by the European Commission.
  2. Boards may be tapping the same small group of women for board seats. 52% of women hold more than one listed board position, compared to only 36% of men.
  3. Women’s participation in committees has improved significantly. Women’s overall participation in committees has improved by 3 percentage points, from 27% to 30% since 2021.
  4. Female directors bring diverse skill sets to the table. For example, female directors are twice as likely to have sustainability experience compared to their male counterparts.
  5. Female directors are likely to be more independent, our data suggests. The average independence level among female directors is 84%, compared to 59% of male directors.

Female Representation Gains Uneven Ground

Our findings suggest that women’s representation across our data set is increasing. Overall, women hold an average of 26% of board seats in our data set. Excluding companies from Japan, female representation on boards is 29%, a two-percentage-point increase from last year (27%). Across all countries analyzed in our sample, women currently account for 37% of new board appointments, up from 35% in 2021.

 

Across all sectors in our analysis, female representation has been steadily increasing since 2019. Our data suggests that the Utilities sector has the highest percentage of women relative to other sectors in our global data set. In the Utilities sector, women currently hold approximately 31% of boardroom seats. The Energy sector, meanwhile, has the lowest female representation, at 21% of boardroom seats in 2022.

Women continue to gain ground in board leadership, but still lag their male counterparts

Our research suggests that the percentage of female directors holding board-level leadership positions has increased from 3% to 4%, while the percentage of men holding leadership positions has remained constant at 14% since 2021. Meanwhile, the percentage of board chair and lead directors that are female has increased from 8% in 2021 to 10% in 2022.

Average Number of Leadership Positions Held by Men and Women

The data suggests that the average female director has held 0.13 leadership roles, compared to 0.57 for male directors, meaning that the average male director has held 4.38x the amount of leadership positions than their female counterparts.

Average Time to Take on Leadership Roles

We also found that the amount of time it takes for women directors to ascend to leadership positions is almost a year shorter, on average, compared to their male counterparts.

Looking specifically at board appointments in 2022, about 18% of male board appointments were appointed directly as leaders, while this number was only 4% for female board appointments.

Our research suggests that women holding board-level leadership positions have increased while that of men has remained constant from 2021 to 2022. In 2021, our data suggested that women leaders across our sample were 3%.

Men are 4.5x more likely to be appointed to the boardroom directly as leaders compared to their female counterparts. Men are also now 3.5x more likely to be board leaders than women in 2022, compared to 4.67x more likely in 2021.

Board Committees See Gains in Female Participation

Overall, the data suggests that female directors made significant progress on board committees in the last year. Compared to 2021, female representation in committees has risen three percentage points, from 27% to 30%, and female representation in board committee chair roles increased by two percentage points, from 24% to 26%.

Committee Breakdown

This year, female participation by committees remained relatively constant. Overall female representation in the audit committee dropped slightly, by two percentage points, from 32% in 2021 to 30% in 2022. The percentage of women holding chair positions on audit committees also dropped from 30% to 27%. Female participation levels in both nomination and
remuneration committees, however, increased slightly.
Women holding chair positions in remuneration committees increased by four percentage points, from 25% in 2021 to 29% in 2022. Overall female participation in that committee also increased by three percentage points, from 27% to 30%. Female representation on nomination committees increased by one percentage point from 2021 to 2022.

Board Refreshment: Age and Tenure

How Does Board Tenure Differ by Gender?

Our data suggest that female board members have a shorter tenure on average compared to their male counterparts. The average tenure of women on boards in our global data set was 5.08 years in 2022, up from 5.02 years in 2021. For male directors, the data suggests that the average tenure was 7.93 years in 2022, up from 7.83 years in 2021. Given the trends observed
here, it appears that women are being added to boards at increasing rates, but low male director turnover may be slowing progress in this area.

Female Directors Younger Than Male Counterparts

Our data suggests that the age differences between male directors and their female counterparts are quite similar from 2021 to 2022. In 2021, the age difference between the average ages of male directors and female directors was 3.59 years, compared to 3.57 years in 2022, with women still relatively younger. Though female directors are younger than their male
counterparts, the average age of both female and male directors is now inching up slightly. The average age for men was 63.68 years in 2022, up from 63.61 years in 2021. For female directors, the average age was 60.02 years in 2021, and grew to 60.11 years in 2022.

 

New director appointments are on average younger than average director age overall. But, our findings suggest that the age of new director appointees is n the rise. The age of male director appointees increased by 2.64 years, from 59.11 years in 2021 to 61.75 years in 2022. The age of new female director appointees increased by 2.38 years, from 56.83 years
in 2021 to 59.21 years in 2022.

Board-Level Independence

Independent directors have been established in most jurisdictions as important catalysts in good corporate governance. Most corporate governance code gives a recommendation on the appropriate mix of dependent along with independent directors on boards. Our findings suggest that the percentage of directors who are independent has increased from 2021 to 2022.
Overall, independent directors hold close to 2 out of 3 boardroom seats. The data also suggests that women directors are 1.4x more likely to be independent than their male
counterparts. This disparity could perhaps be explained by the fact that there are relatively far fewer women in the C-suite of public companies compared to men, which is the pool that many dependent directors are commonly pulled from.

 

Are Boards Tapping the Same Small Group of Women to Serve?

As the push to include more women in the boardroom continues, a common concern among diversity advocates is that the same group of women would be rotated from boardroom to boardroom rather than tapping new, board-ready female talent. Our data seems to support that notion this year, as our findings suggest that 52% of female directors hold more than one listed board position, compared to about 36% of male directors. This is a sharp drop from our last year’s findings, when 55% of male directors held more than one board position.
These findings are also in-line with other research showing that boards tend to add women who are already sitting on other boards instead of appointing women who have never served as a director before.

How Do Director Skill Sets Differ by Gender?

Our data suggests that 87% of all female directors have nonexecutive backgrounds, compared to 77% of male directors. The research also suggests that 2% of women have sustainability expertise, compared to approximately 1% of their male counterparts. A higher percentage of female directors have technology experience compared to male directors as well, at 8.2% relative to 7.7% respectively. On the whole, the differences in skillset backgrounds between male and female directors suggest that female directors are more likely to bring nontraditional expertise backgrounds compared to men.

Spotlight: Progress in California Two Years Out from Legislation

In September 2018, California passed SB 826, which requires public companies headquartered in California to have at least one woman on their boards by close of 2019 calendar year. In our previous reports, we took a closer look at California to see how issuers were diversifying their boards. The data suggests that women currently hold approximately 28% of board seats in the state of California, beating the overall United States average of 24% by four percentage points.

Spotlight: Gender Diversity in Japanese Boardrooms

Japan lags Western countries in female representation on boards

In June 2021, the Tokyo Stock Exchange (TSE) announced the second revision of its Corporate Governance Code, which was first formulated in 2015. Similar to the UK Corporate Governance Code, listed companies are required to disclose information inline with the “comply or explain” approach for each principle stipulated in the code. The revision of the Corporate Governance Code is also closely related to the promotion of diversity on the board of directors, the subject of this report.
While gender and internationalization have been required to be considered in board composition, the revised code now requires that age and professional experience also be included. In addition, disclosure of the so-called “skills matrix,” which lists the knowledge, experience and abilities of each director, is also required. Listed companies are also required to:

  • Clearly state their stance on ensuring diversity in the appointment of core human resources, including the appointment of women, nonJapanese and midcareer hires to management positions.
  • Set voluntary and measurable goals for the appointment of core human resources and disclose the status of those goals over time

Overall, the level of female representation on Japanese boards is improving. According to data from Diligent’s Compensation and Governance Intel (CGI), the percentage of women on the boards of the companies that make up the Nikkei 225 Stock Index has been rising steadily, to more than 10% (Figure 1). The voting advisory policies of Glass Lewis and Institutional Shareholders Services (ISS) for Japan are also encouraging the appointment of women to the boards of Japanese companies. Starting in 2019, Glass Lewis now requires companies in the TOPIX Core 30 and TOPIX Large 70 to have at least one female board member (director, auditor or executive officer at companies with nominating committees), expanding the requirement to the TSE first and second sections in 2020, and then to all listed companies from February
2022 onward. ISS requires that at least 10% of the board of directors of companies listed on the prime market be composed of women and other gender-diverse directors from February 2023 onward. ISS also recommends that top management vote against the proposal for the election of directors if there are no female directors at the shareholders’ meeting held
after February 2023.
However, Japan still lags European and US companies in the percentage of women on boards of directors. According to Diligent’s CGI data, about 30% of board seats in Europe and about a quarter in the US are held by women. Unlike Japan, some European countries, such as Germany, Norway, and France, mandate listed companies and large corporations have certain percentage of female directors (30%–40%) by law. The state of California in the US also requires listed companies, both domestic and foreign, that are based in the state to appoint female directors. Voting advisory firms have also set stricter standards for the appointment of women overseas. For example, from January 2023, Glass Lewis will require its Russell 3000 constituent companies in the US to have at least 30% of their boards of directors comprised of women and other gender-diverse individuals.

HRGL frequently interviews overseas institutional investors about the status of their dialogue with Japanese companies. When asked for their opinion on the diversity of the board of directors, several foreign institutional investors said there are a number of companies in Japan where the board of directors is mostly composed of men, even though the sale of products is mainly targeted at women, and that female consumers account for a high percentage of the company’s total sales. They added that such disparity needs to be improved. Incorporating diverse perspectives into the board of directors is expected to promote innovation, such as the creation of new products and services, and prevent companies
from falling into groupthink that tolerates irrational or dangerous decision making. The 30% Club, a worldwide campaign to increase the percentage of women in corporate management, also points out that “an appropriate balance of men and women in management not only promotes good leadership and governance, but also improves the performance
of the board of directors as a whole, ultimately contributing to the interests of both the company and its shareholders.” In addition, the COVID-19 pandemic has changed people’s consumption preferences and values more significantly than ever before. As there is an even greater need to capture the diverse needs of consumers and customers to create innovations, we believe that promoting diversity in the world coexisting with COVID-19 has important implications for corporate management.

Women’s employment levels have increased, but career progression remains a challenge. What are the reasons for Japan’s slow progress on female representation?

Japan is notorious for being historically and culturally patriarchal. The culture of paternalism (patriarchy) still remains in Japan, with the gender norms that “husbands should work and wives should stay at home” having been ingrained in society for years. The Japanese government has conducted public opinion polls on this mindset. The results show that
in 1979, 70.1% of women and 75.6% of men generally agreed with the idea that husbands should work and wives should stay at home, while in 2012, 48.4% of women and 55.1% of men, about half of both men and women, agreed with the idea (Figure 2). In the most recent survey (2019), only 31.1% of women and 39.4% of men were in favor of the idea. Although the number of those opposed to the idea has increased, we can see that until just 10 years ago, such beliefs about gender norms were held by the near majority of Japan. The results do not mean that the situation of women’s participation in society in Japan has not improved over time. For example, in 1980, the labor participation rate of women by age group showed an M-shaped curve, with a large decline in the 25–34 age group and a gradual recovery after the age of 35 (Figure 3). In other words, there used to be a marked tendency for the labor participation rate to decline during the years of marriage and childbirth, and then to rise again when the child-rearing years were over. As a background to the improvement of the M-curve, the Japanese government cites (1) an increase in the number of women who wish to remain in the workforce for a long period of time due to the increasing number of
unmarried women, and (2) an increase in the number of women who wish to remain in the workforce after marriage and childbirth. There are signs that the problem of women’s career disconnection due to marriage and childbirth is being resolved.

On the other hand, the percentage of women working in managerial positions is still low compared to other countries. Comparing the percentage of women in the workforce and the percentage of women in managerial positions, the percentage of women in the workforce in Japan is not far off from that of other countries, but the figure for women in managerial positions in Japan is 13.3%, which is much lower than that of Western countries and developing countries in Asia, such as the Philippines and Malaysia (Figure 4). Without an increase in the number of women with managerial experience, there will be no increase in the number of female candidates for C-suite level directors and other positions that provide a higher perspectiveon management. One of the reasons the revised Corporate Governance Code required companies to clearly state their stance and set measurable goals for ensuring diversity in the appointment of core personnel, including women, to management positions, is that there was a sense that the absolute number of women in management positions who are
candidates for the next C-suites and directors was low.
To summarize, in Japan, there is an improving trend in the employment of women, but there are still many issues that need to be resolved in establishing a career path for women to join the board of directors and other management positions.

 

Director Perspectives: Excerpts from Better Boards Initiative’s Best Practice Research

How does diversity enhance boards?

BBI Founders Cate Goethals and Joanna Lohkamp interviewed 103 sitting corporate directors on how their boards have evolved and improved as they have added women and people of color. Below are some quotes from BBI’s Best Practice Research.

On Diversity of Thought

“The tone in the boardroom changes when there is diversity, and for the better. It brings various vantage points to look at an issue in different ways. The diversity coming into the boardroom now is really enhancing the conversation.”- Male Committee Chair

“You get a bunch of older white males together and they’re going to think largely along the same lines. Diversity on the board promotes a broader depth of discussion and brings in different perspectives. Overall it’s healthy for the board and healthy for the company.”-Male Committee Chair, US and Global Boards

On Diverse Board Leadership

“Appointing women to board leadership positions sends a powerful signal to all the stakeholders of the company, including employees.”- Female Fortune 500 Lead Director and Committee Chair

“If you have a diverse board and you care about diversity, you need diversity in the leadership positions too, the same way you do in a company.”-Female Committee Chair, US Fortune 500 and Global Boards

On Representing the Customer Base

“Women raised the game. They raised the game because all companies are set up to serve a customer. And the only way you can truly understand and serve that customer is if you’ve
walked in their shoes or in some cases lived in their skin. They bring a deeper level of empathy and understanding, but they also bring a diverse set of experiences, which sharpen all ideas in the boardroom.”- Male Fortune 500 Chairman

“More diversity on the board has given more employees of every color and gender and persuasion more opportunity in the workforce, more development, more opportunity to see role
models, more progression and promotion. There’s no question.”- Female Fortune 500 Committee Chair

About the Author

Edna Twumwaa Frimpong

Edna Twumwaa Frimpong

Head of International Research

Edna Frimpong is an experienced research analyst with a demonstrated history of working in the information technology and services industry. In her role with the Diligent Institute, Edna oversees and directs corporate governance research projects and partnerships internationally, outside the US. She joined Diligent Institute in 2021 after six years with CGLytics  -- a corporate governance analytics firm based in Amsterdam, The Netherlands, acquired by Diligent -- where she served as Head of Research for the EMEA region. Previously, Edna held research positions at firms including Sustainanalytics and Carnomise.  She received her Master's Degree in Finance and Law from the Duisenberg School of Finance in Amsterdam, and her Bachelor's Degree in Administration, Insurance and Risk Management from the University of Ghana.