Smaller Public Companies Lag on Boardroom Diversity

The discussion around gender diversity has secured its place in corporate governance circles over the last few years. In that time, the presence of women in the boardroom has grown steadily, albeit slowly, and most of the largest public companies have made the most progress in adding diverse directors. For example, according to Equilar’s Board Composition and Recruiting Trends 2016 report, only 1.4% of S&P 500 boards of directors in 2016 failed to include at least one woman, which decreased from 11.6% in 2012. In an analysis of the Russell 3000, Equilar found that in comparison, 23.3% (658 companies) had all-male boards.

 

r3k-first-time-directors-by-gender
Source: Equilar

More proof that smaller companies are lagging their larger counterparts is evident in the recruiting trends of these boards. In fiscal 2015, 1,155 directors joined Russell 3000 boards that had never served on any public company board. Of these directors, only 15% were female. Meanwhile, in the S&P 500, of newly elected directors who never served on an S&P 500 or Russell 3000 board, 25.5% were women in 2015. Generally, boards of smaller public companies, much like those in the Russell 3000, are often the starting point for first-time board members to gain experience before moving on to larger cap companies. If fewer women are elected seats on Russell 3000 boards, the pipeline to progress at larger companies may be constricted as well.

Many boards cite a lack of qualified and experienced female candidates as the main roadblock to diversifying boards. As a result, higher multi-boarding rates for female directors are evident as the demand for board-ready women escalates.

While larger companies are making strides in diversity, smaller companies are following along at a slower pace. In order for the fuller complement of public companies to catch up to larger firms in the S&P 500, more first-time female directors will need to find their way from senior management positions into corporate boardrooms. Currently, approximately four in five women who serve as executives of a public company have never served on a board.

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For more information on this and related topics, visit the Equilar Knowledge Center. To learn more about custom research available through Equilar’s Research Services, please contact the Equilar research team at researchservices@equilar.com.

For more information on Equilar research and data analysis, please contact Dan Marcec, Director of Content & Communications at dmarcec@equilar.com. Allyson Hahn, research analyst, authored this post.

 

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