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Diversity dial is turning, but not fast enough globally

Lisa Edwards - Diligent

The UK leads as the only country in Europe requiring listed companies to include at least one director from an underrepresented ethnic or racial group. However, this is not enough.

While progress has been made in driving gender diversity on corporate boards, there are still massive gaps in how diversity is defined and represented on boards around the world.*

New research shows that boardroom diversity by race, ethnicity, age, and LGBTQ+ representation lags significantly behind gender diversity globally. Female directors hold approximately 29% of board seats in continental Europe. When including companies in the U.K, this increases the average to 31%, in both cases beating the global average of 27% with a 4-percentage-point increase since 2019.

The Modern Leadership Report is the first ever global analysis of several major dimensions of boardroom diversity including gender, race/ethnicity and nationality, skillset, and LGBTQ+ representation. Produced by Diligent, in collaboration with 22 partnering organizations around the world, the report provides a first-of-its-kind holistic view into the progression of diversity and inclusion on public and private boards worldwide. The U.K is currently the only country in Europe requiring listed companies to include at least one director from an underrepresented ethnic or racial group. In large part due to laws and quotas, Europe as a region leads the world in terms of boardroom gender diversity — despite regional variations from country to country.

“Diversity has risen up the boardroom agenda as organizations face increasing pressure to better reflect the diversity of their customer bases and communities, but progress has been slow and there are still many gaps when it comes to reporting on race, ethnicity and LGBTQ+ representation on boards,” said Lisa Edwards, President, and COO of Diligent and board director at Colgate-Palmolive. “This report provides new, critical insights into how boardrooms worldwide are progressing against diversity goals and where there is still much work to be done.”

Among the top findings of the Modern Leadership Report:

  • Diversity by directors’ nationality, race, and ethnicity lags gender diversity globally, with the majority of analyzed countries not disclosing the ethnicity of each of the directors on the board. The percentage of S&P 500 directors from underrepresented racial/ethnic groups is only 22% and has not increased since 2021. Meanwhile, the percentages for Fortune 100 and 500 boards are 17.5% and 20.6% respectively as of 2020, and 24% for the Russell 3000 as of June 2022.
  • Director appointments are far from gender parity. Only 36% of director appointments through May 2022 were female, on pace with the average for all of 2021. Female directors currently hold approximately 27% of public company board seats, up from 26% in 2021 and a four-percentage point increase from 2019.
  • Female directors in Europe trend younger than their male counterparts and have shorter tenures. The average age of female directors is roughly four years younger than their male counterparts, at 60 and 63.5 respectively. Female directors also have shorter tenures than their male counterparts at 4.7 years compared with 7.6.
  • The issue of LGBTQ+ representation is significantly behind other elements of boardroom diversity, with the U.S. being the only region analyzed that provides this data. Members of the LGBTQ+ community hold only 0.5% of board seats in the Fortune 500. Currently, the collection and disclosure of board race/ethnicity and LGBTQ+ representation data is non-existent in continental.
  • New expertise types are being added to the boardroom, with 35% of newly appointed board directors bringing skillset backgrounds in areas like technology, marketing, sales, HR, ESG and legal in 2022. 7% of female directors in the UK have technology expertise compared to 4% of male directors, the highest percentage of female board members is in the communications sector at 33%, while the energy sector has the lowest level of female representation at 25%.
  • All-Male Boards Persist for Private Companies. In a review of 228 private growth-stage companies, Diligent found 58% have all-male-boards, compared with only 6% of publicly traded companies. Women hold approximately 11% of board seats on these private companies compared to 27% in public companies.

“The global picture of boardroom diversity today is varied and full of gaps, but what’s overwhelmingly clear is that gender diversity is the primary focus for boards around the world. Board diversity regarding race, ethnicity, age, and LGBTQ+ representation fall woefully behind,” said Dottie Schindlinger, Executive Director of the Diligent Institute. “By better understanding the state of boardroom diversity across the globe, we’re able to increase the odds that corporate leadership opportunities will be made available to underrepresented groups.”

*according to Diligent

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