Gender balance on company boards is even worse than you think

Striking a balance.
Striking a balance.
Image: Reuters/Tobias Schwarz
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Women are greatly underrepresented on company boards, so the share of female directors is closely tracked and publicized regularly to put pressure on firms. (That is, in places where there aren’t already quotas, like France and Norway.) The problem is that headline numbers don’t always reflect the true story.

Take the latest data from Equilar, which looks at female representation among directors at Russell 3000 companies in the US. The consultancy notes that in the past year there has been a slight uptick in the share of women with seats on boards, from 15.9% in February to 16.2% at the end of June.

Any progress, however slight, is welcome. But indexes like this measure representation at an aggregate level, rather than on a per-company basis, which means the data can be skewed by companies that do a lot more to promote gender diversity than others. The median share of women in board sets is lower, at 14.3%. Only 16 companies have 50/50 parity on their boards, while eight have more women than men as directors.

It’s trickier still when you consider that one woman serving on multiple boards can be counted several times in the aggregate data. The fact that women are more likely to be appointed to seats vacated by other women is another factor that restricts more women from becoming directors. A PwC study last year found that 87% of new directors had been recommended by other board members, which can perpetuate the “boy’s club” nature of boardrooms.

Some companies say that because women tend to have less executive experience, there are fewer candidates to choose from when it comes to filling non-executive director roles. But as consultancy McKinsey points out, once a company has defined what it wants in a new director, such as digital or finance expertise, the search should cast the net wide, looking for people with transferable skills who haven’t necessarily been in the C-suite before. Companies benefit from the innovation and fresh thinking that comes from fostering a variety of perspectives across the workforce, perhaps in the boardroom most of all.