S&P 500 boards are slowly becoming more diverse, according to an annual study by executive search and advisory firm Spencer Stuart. Of the 395 new independent board directors appointed in 2022, 74% came from outside executive ranks. Of these, 72% came from historically underrepresented groups, including women, underrepresented racial and ethnic groups and members of LGBTQ+ communities. Nearly one-fifth (18%) are age 50 or younger.
However, due to persistently low boardroom turnover, the transformation of overall board composition is happening slowly. Consistent with prior years, new directors account for only 7% of all S&P 500 directors, the study found.
Even so, the breakthroughs that boards have made in recent years by appointing directors with diverse skills, age, gender, race, ethnicity and geography can’t be discounted, Spencer Stuart noted in a Nov. 2 press release. “We expect this trend to continue, as we’re seeing a growing push for diversity among stakeholders, who view each director search as an opportunity to foster a culture that welcomes and respects a range of perspectives,” Julie Hembrock Daum, who leads the firm’s North American Board Practice, stated.
SPONSORED by Jobcase
Do you know the American Worker?
The America@Work Report will guide you. We surveyed 4,000 hourly and skilled workers to understand the issues they face to ensure no worker gets left behind.
Download the Report
The need for diversity and inclusion among corporate leaders is well documented. Referencing a 2018 McKinsey study, a recent post by the Corporate Governance Board, a global institute for board directors, points out that better financial performance is significantly tied to diverse leadership. In particular, the CGB cites the McKinsey finding that companies in the top quartile for ethnic diversity at the executive level are 33% more likely to have above-average profitability than companies in the bottom quartile.
Business leaders say employees — more so than customers — are driving the push for DEI conversations, a September report from Heidrick & Struggles showed. The report also found that executives are recognizing that increased emphasis on DEI initiatives improves corporate reputation and employee engagement — and worker engagement is integral to winning the war for talent, Heidrick & Struggles said.
But corporate boards still influence a company’s culture, talent strategies, brand and ultimately the bottom line, one expert previously wrote for HR Dive. However, there’s still a lot of work to do, and singularly focusing board diversity on gender or race won’t garner results, the expert said.
Instead, corporate leaders should work toward removing the structural barriers that keep Black women and other persons of color from being appointed to boards. These individuals can bring rich experience as division heads, department executives and key niche experts, but they’re not being considered for board spots because they don’t have prior board experience.
Executives can break this cycle by loosening the requirement for prior board experience. They can also ask women for recommendations, and they can reach beyond familiar networks to organizations like The Leverage Network, which hosts an annual Executive Women of Color Summit, one expert suggested. To kickstart a robust prospect list, search committees can do some high-level research to uncover top Black women in finance or inspirational Black women in tech, they added.