As the US population continues to diversify, companies will need to appoint more women and minorities to management and board roles.
In Missing Pieces Report: The 2016 Board Diversity Census of Women and Minorities on Fortune 500 Boards, developed jointly by Deloitte and the Alliance for Board Diversity, the authors state that shifting demographics in the US have “brought diversity to the forefront of issues on the minds of C-suite executives and corporate boards.”
The study, based on data collected over the four-year period of 2012-2016, found that women and minorities occupy nearly 31% of the board seats of Fortune 500 companies. While there has been a slight increase over the past four years, white men still hold a significant majority. Progress towards greater diversity in boardrooms has been incremental, and gains have not nearly kept pace with the broad demographic changes taking place in the US within the same period.
The Alliance for Board Diversity has set a target of 40% women and minority representation on boards. But according to Chairman Ronald C. Parker, this level will not be reached until 2026 if progress continues at the current rate. “This is not acceptable”, said Parker. “Corporations need to do more to keep pace with the country’s changing demographics.”
Part of the problem is legacy. Boards generally want to recruit people with chief executive experience, and due to a historic lack of diversity in executive roles, these candidates tend to be white men. Further, with an average tenure of eight to 10 years (only a handful of firms have term limits), the number of board seats coming available each year is small, the New York Times reports. This makes changing board composition a slow process.
The number of African-American men on Fortune 500 boards increased by only 1%, primarily in the Fortune 100, while the portion of seats occupied by African-American women increased by 18.4%. African-Americans had the highest rate of serving on multiple boards, which according to Parker indicates that “companies are going to the same individuals rather than expanding the pool of African-American candidates for board membership.”
The percentage of white women in Fortune 500 board seats has increased by 21.2% since 2012, while the number of white men has decreased by 6.4%. Hispanics made a small gain, representing 3.5% of the total. Similarly Asians occupy just over 3% of the total.
The diversity numbers at Fortune 100 companies are higher overall, Parker noted, with 35.9% of women and minorities holding board seats versus just under 31% for Fortune 500 companies. Still, since the Alliance began collecting data for Fortune 100 companies in 2004, gains for women and minorities have been modest. The diversity figure was 28.8% 13 years ago.
