Boardrooms across the US are starting to reflect a broader range of lived experiences, however, the rate of board diversity progress remains slow, revealed a new report.
The study highlighting board diversity trends across Fortune-ranked companies, carried out by Deloitte and the Alliance for Board Diversity (ABD), found that nearly 45% of women and underrepresented racial and ethnic groups held board seats in 2022, up from 38% in 2020. Nevertheless, the pace of change remains inconsistent and uneven across demographics.
The findings from this year’s “Missing Pieces” report revealed that although more than half of Fortune 500 board seats are still held by White men (55.3%), women and individuals from underrepresented racial and ethnic groups have recorded gradual increases. In 2022, women held more than 30% of Fortune 500 board seats, up from 26.5% in 2020. African American/Black women saw a 47% increase, gaining 86 board seats since 2020. Asian/Pacific Islander women gained 24 seats and saw an increase of 27%. Hispanic women/Latinas saw an increase of 23.7%, totalling 14 seats.
Underrepresented racial and ethnic groups continued to make strides in the boardroom as well, increasing the number of board seats in the Fortune 500 from 17.5% in 2020 to 22.2% in 2022. In particular, the percentage of African American/Black board members grew from 8.7% to 11.9%; Asian/Pacific Islander board members grew from 4.6% to 5.4%; and Hispanic/Latino(a) board members grew slightly from 4.1% to 4.7%. That said, even though all groups have seen growth in board representation over the last decade, no Fortune 500 company board fully represents the demographic population in the United States.
SLOW DIVERSITY PROGRESS
“The findings from this year’s report show gradual steps in the right direction, but at this pace, US top corporate boards might not represent the nation’s population until 2060,” noted Carey Oven, National Managing Partner at the Center for Board Effectiveness at Deloitte LLP. “Board diversity and inclusion isn’t only the right thing to do; it is a business imperative that builds broad stakeholder trust that ultimately can lead to better business outcomes.”
“Over the past few years, we’ve seen increased pressure on corporate boards to create a boardroom that is reflective of the gender, racial and ethnic diversity that exists in society more broadly. While we’re pleased to see growth, we are also reminded of the importance of creating a welcoming environment for these diverse voices to be heard and received,” added Kwasi Mitchell, Chief Purpose and DEI Officer at Deloitte US. “This report is a reminder of the change we can create when we collectively commit to equity and ensuring all individuals — regardless of race, ethnicity, or gender — have a seat at the table.”
LACK OF REPRESENTATION ON BOARDS
Looking specifically at data changes between 2020 and 2022, the levels of diverse representation are slightly higher in the Fortune 100 than in the broader Fortune 500, with 46.5% of board seats held by individuals who are women and/or from underrepresented racial and ethnic groups (versus 44.7% in the Fortune 500). While representation is greater in the Fortune 100, the rate of change is, however, much slower. For example, over the last decade, the share of women and individuals from underrepresented racial and ethnic groups on boards increased by only 44.9% for the Fortune 100 compared to 67% for the Fortune 500.
More than half of the Fortune 500 boards now have 40% of their seats held by White women and individuals from underrepresented racial and ethnic groups. Between 2020 and 2022, an additional 81 companies moved into this group, for a total of 281 companies. Currently, just four companies have boards where less than 10% of directors are White women and/or individuals from underrepresented racial and ethnic groups.
“Women continue to lead the growth of board diversity, and this was a banner year for that momentum,” shared Lorraine Hariton, President and CEO of Catalyst. “Still, while crossing the critical mass threshold of 30% women on corporate boards is meaningful progress, we have a way to go until boards truly represent the population and the people they serve.”
KEY BOARD DIVERSITY FINDINGS
Some of the key findings from the report revealed that:
- Across industries, gender diversity on boards was highest for consumer businesses (32%). In terms of racial and ethnic diversity, life sciences and health care leads in representation (25%).
- The power and utilities sector has the highest percentage of African American/Black directors; the technology sector has the highest rate of Asian/Pacific Islander directors; and the energy and chemicals sector had the highest percentage representation of Hispanic/Latino(a) board members.
- For the Fortune 100, women from underrepresented racial and ethnic groups saw significant increases, gaining board seats. The largest percentage gain in seats between 2020 and 2022 was Hispanic/Latina board members, with 45.5% growth. African American/Black women saw a growth of 38.1%, and Asian/Pacific Islander women saw a growth of 23.5%. These are significantly larger percentage increases than the three groups saw from 2018 to 2020.
- Fifty-three companies in the Fortune 500 now have greater than 60% of their board seats filled by women and individuals from underrepresented racial and ethnic groups, the highest level to date.
- When compared to the current estimates of the US census populations, only 16 companies have boards with 50% or more women. Only 13 companies have 18% or greater Hispanic/Latino(a) representation. Two hundred and four companies have 13% or greater representation of African American/Black board members. Two hundred and eleven companies have 6% or greater Asian/Pacific Islander representation.
LACK OF HISPANIC & ASIAN REPRESENTATION ON BOARDS
The report revealed that Hispanic/Latino(a) board representation has remained relatively flat since 2004. “By 2060, the Hispanic population will be almost 30% of the nation’s population, yet fewer than 5% of corporate board positions are held by Hispanics, which makes us the community with the largest disparity of board representation compared to our population and economic influence,” noted Cid Wilson, Chair of Alliance for Board Diversity and President and CEO of Hispanic Association on Corporate Responsibility (HACR). “This lack of representation is a missed opportunity for companies to drive greater innovation and business growth for an influential global economic force as we are the fifth largest economy in the world. The (HACR) will continue to urge companies to make greater progress on Hispanic board representation and Hispanic inclusion overall in Corporate America.”
The sentiment was shared by the Leadership Education for Asian Pacifics’ (LEAP) President and CEO Linda Akutagawa. “Despite the increased focus on board diversity in recent years, it is concerning to see that less than half of the Fortune 500 boards have 6% or greater representation of Asian and Pacific Islanders (APIs),” highlighted Akutagawa. “The underrepresentation of APIs on Fortune 500 boards is an issue of equity and innovation. Corporate America should make it a priority to fill open board seats with qualified and diverse individuals, to benefit not only underrepresented communities but also ensure the sustainability of all businesses.”
BUSINESS CASE FOR BOARD DIVERSITY
The Executive Leadership Council’s President and CEO, Michael C. Hyter, however, said he was “encouraged by the significant increase in board seats held by African American/Black members from 2020 to 2022”. He believes the national focus on social and racial justice in 2020 played an important role in this growth, and highlighted the importance of holding on “to this progress”. “The threat of company restructurings and layoffs is impacting corporate diversity efforts, so we must remind companies about the importance and business case for DE&I, especially regarding boards,” added Hyter.
Boards are inevitably taking on a more active role in helping organisations navigate uncertainty and shifts in the economy and the global workforce. “Increased digitization, new and emerging roles, shifting demographics, and high CEO turnover has put more demand on governance across industries and sectors. Diversified Search Group recognises the significant opportunity to influence board diversity and inclusive leadership for better preparedness, decision-making, and performance now and in the future,” concluded Aileen K. Alexander, CEO of Diversified Search Group.
To read the full “Missing Pieces” report, click here.
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