Research by Deloitte and the Alliance for Board Diversity (ABD) found that not only do gender-diverse boards do better financially, they also have fewer instances of controversial business practices.
Deloitte and ABD’s sixth ‘Missing Pieces’ report found that women and minority board members were more likely to bring the skills needed for the post-pandemic future of work. These skills include corporate sustainability and socially responsible investing, government, sales, and marketing, as well as tech.
Despite this clear business case for diverse boards – particularly for the future of work – Fortune 500 companies are a long way from having 40% diversity on their boards, which is ABD’s aspirational diversity representation rate.
Although the number of Fortune 500 companies with over 40% diversity on boards has reached 200, which is almost four times higher than the 2010 figure – it reached a height of 38.3% in 2020 – the average growth in diverse boards has been less than 0.5% since 2004.
Therefore, the report is suggesting that board representation will not reach the aspirational 40% until 2074 across all Fortune 500 companies.
Although 29 Fortune 500 companies demonstrated 60% or greater female and minority representation on their boards, six Fortune 500 companies still have an entirely white male board.
In addition, the diversity success in the past four years since ADP and Deloitte’s 5th report in 2016 is not shared equally. It is mainly concentrated in Fortune 100 companies and among white women.
White women have seen a 20.6% increase in board seats numbers since 2018 – they gained 209 seats in 2020 – compared to 29 seats for Black women, 13 and 14 seats for Latino men and Latina women respectively, and 33 and 28 seats for Asian or Pacific Islander men and women respectively.
Minority men, in particular, saw no substantial increase in the rate of their representation with Black men actually seeing a decrease of five board seats in 2020, compared to 2016 levels.
Further to this, women and ethnic minorities often serve on more than one board – ADP and Deloitte’s research found that 36% of diverse board seats are occupied by those who serve on multiple boards. This is because Fortune 500 companies usually pull from existing minority board members rather than bringing in new directors. There is an urgent need to share out the board member opportunities more widely.
ADP chair Linda Akutagawa said: “While we applaud the progress that businesses have made in increasing board diversity, we need to ensure representation is holistic and inclusive for all – not just for one segment of an underrepresented population.
“Despite heightened focus on board diversity the past year, not a single Fortune 500 boardroom is representative of the population of the US.”
Deloitte risk and financial advisory chief talent office and Center for Board Effectiveness national managing partner Carey Owen added: “The ‘Missing Pieces’ report shows that while considerable progress has been made, and that companies are moving in the right direction in terms of equal representation on boards, there is still work to be done.
However, ADP and Deloitte’s report is optimistic that the world is on a cusp of accelerated progress in terms of diversity, equity and inclusion at board level, particularly given the workplace disruption that we are all experiencing at the moment.
However, to achieve this ADP notes “it is time for boards to be cognizant of and not to rely on the potential unconscious bias that could be a default to “who do we know” when presented with a board opening. This opportunity can shape the future of business and the board.”