Op-Ed: We’re Still Chasing Boardroom Equality

Women have made it to the boardroom. Now it’s time for them to lead.

Today, no company in the S&P 500 has an all-male board. In the broader group of companies that make up the Russell 3000 index, nearly 21% of directors are female, up from 15% in 2017. And women now constitute 45% of all new directors joining boards at companies of all sizes.

These advances are welcome, but they are only the start of what must be an ongoing effort to increase not just the number of women on corporate boards, but also the board leadership opportunities available.

According to Deloitte, women account for less than 20% of board committee chairs globally. And a 2017 study found that women are less likely than men to serve as board chairs or lead independent directors, even after controlling for the relatively shorter tenures of female directors compared to their male counterparts.

Being in the room is no longer enough. Only by gaining access to leadership positions can women properly influence board agendas and ensure their perspectives are considered.

Large institutional investors have a duty to press for greater board leadership opportunities for women—and not just for the sake of gender equality. Boards need diverse perspectives to avoid groupthink, ensure understanding of the diverse markets in which they operate, capitalize on the fast-moving trends reshaping the global economy—including the coronavirus pandemic—and retain and attract employee talent.

Equally as powerful is the impact on bottom lines. Voluminous research from Catalyst, a global nonprofit that works with CEOs to create better working environments for women, documents the relationship between board diversity and improved financial performance.

But it isn’t just the large institution that holds a responsibility. Managers must also take action to increase leadership opportunities for women, and that starts with engagement.

Typically, smaller and mid-size companies are more vulnerable to diversity challenges and opening a dialogue with leadership  can create real change either in female appointments or with a commitment to diversity. If leadership is not responsive, take concrete action and use the power of the proxy to vote against leadership without diversity.

Boards slow to change are quick to point to logistical hurdles as an excuse for their inaction. They tell us competition for talent is fierce and top female candidates are difficult to recruit.

The reality is that some companies are simply too limited in their outlook. Instead of relying on the status quo to fill open seats, encourage them to engage outside recruiting firms with a track record of identifying top female talent. Urge them to think more expansively about what skills they need on the board.

A new board member need not be a current or former CEO. Indeed, a chief financial officer, chief marketing officer, chief human resources office, or business unit head can bring valuable experience to the boardroom. 

Companies with truly diverse boards will find additional corporate and societal benefits, including happier employees and better engagement with environmental, social, and governance (ESG) considerations. 

Companies should look to governance best practices and conduct annual board evaluations to review committee assignments and make sure they are rotating committee chair roles as a way to ensure that more members of the board, including women, can take on leadership roles. Ongoing board training can also help board members, regardless of their background, learn and refresh skills necessary for effective leadership.

Beyond engaging the corporate leadership, managers should also look to their own gender inclusion efforts globally. While North American and European companies have made progress, Asian nations, specifically Japan, lag behind.

Women hold just 5.2% of board seats in Japanese companies, according to Deloitte, so the same criteria used for US-based firms must be applied to nearly 400 Japanese companies that currently have no female representation. Directors at Japanese companies who are responsible for gaps in gender diversity can expect to see more “no” votes.

Every proxy season offers another opportunity for shareholders to deliver the message that diverse boards with diverse leaders deliver better results for their companies and our world. Let’s keep pushing for boardroom equality.

This feature is to provide general information only, does not constitute legal or tax advice, and cannot be used or substituted for legal or tax advice. Any opinions of the author do not necessarily reflect the stance of Institutional Shareholder Services or its affiliates.

Amy O’Brien is global head of responsible investing at Nuveen, where she is responsible for the integration of environmental, social, and governance (ESG) issues.