Number of Fortune 500 Boards With Over 40% Diversity Doubled Since 2012
Thursday, January 17th, 2019
The number of Fortune 500 companies with greater than 40 percent diversity has more than doubled from 69 to 145 since 2012, according to the "Missing Pieces Report: The 2018 Board Diversity Census of Women and Minorities on Fortune 500 Boards," a multiyear study published by the Alliance for Board Diversity (ABD), in collaboration with Deloitte. Fortune 500 board representation of women and minorities saw an all-time high at 34 percent (1,929 board seats), compared to 30.8 percent in 2016 (1,677 board seats). Total minority representation increased to 16.1 percent (912 board seats) from 12.8 percent in 2010, the first year Fortune 500 data was captured. Report findings point to the increase being driven by the Fortune 100 companies, which have 25 percent women and 38.6 percent women and minorities. The Fortune 500 companies lag behind with 22.5 percent women and 34 percent women and minorities. Though still a slow pace in relation to the rapidly shifting demographics in the U.S., the shift points towards greater diversity in America's boardrooms.
Key findings for the Fortune 500 include:
African American/Black women gained 32 seats in 2018, an increase of 26.2 percent from 2016. African American/Black men gained 26 seats in 2018, an increase of 8.5 percent from 2016.
Hispanic/Latino men gained 21 seats in 2018, an increase of 14.3 percent from 2016. Hispanic/Latina women gained four seats in 2018, an increase of 9.8 percent from 2016.
Asian/Pacific Islander men gained 25 seats in 2018, an increase of 20.3 percent from 2016. Asian/Pacific Islander women gained 17 seats, an increase of 38.6 percent from 2016.
The study also showed that boards more frequently will pull from a pool of existing minority board members instead of bringing in new directors. African American/Black women and Hispanic/Latinas hold "recycle rates" – the rate at which individuals serve on more than one board – of 1.39 and 1.36, respectively. The recycle rate of many minority groups increased from 2016 to 2018. African American/Black men hold the highest recycle rate of any group, 1.41 – whereas Caucasian/White men who have a recycle rate of 1.19.
"The increase in boardroom diversity over the last two years is encouraging, but we must not overlook that Caucasian/White men still hold 66 percent of all Fortune 500 board seats and 91.1 percent of chairmanships on those boards. Not only is this unrepresentative of the country's current population, the more important issue is that we know from research that having a diverse board leads to better business results. This is a bottom-line issue," said Linda Akutagawa, chair for the Alliance for Board Diversity and president and CEO, LEAP (Leadership Education for Asian Pacifics). "We encourage corporate boards to continue to embrace the benefits of diverse board composition and further their efforts to match the changing demographics we are experiencing in this country today."
The Fortune 100 in contrast is leading growth in the boardroom, outpacing the Fortune 500 with 38.6 percent of women and minorities holding board seats, compared with 34 percent in the Fortune 500.
Other key findings for the Fortune 100 include:
In 2018, 19.5 percent of board seats in the Fortune 100 were held by minorities, though that is still a larger percentage than in the Fortune 500 (16 percent).
African American/Black women and Asian/Pacific Islander women achieved the largest increase in board seats: 44.8 percent (13 seats) and 30.8 percent (four seats), respectively. Caucasian/White men saw a decrease of 23 seats, a decrease of 3 percent. Regardless of race, the census found an overall decrease of the number of men on boards, at 1.2 percent (11 seats lost).
The total number of companies with greater than 40 percent diversity increased from 33 companies in 2016 to 46 companies in 2018. With the benchmark ABD has set (40 percent women and/or minorities on boards by 2020), the Fortune 100 is leading in achieving that milestone.
"More and more companies are realizing the significant benefits of having a diverse and highly-skilled board. The 2018 Missing Pieces Report demonstrates that while progress has been achieved, there is still much more work to do," said Deb DeHaas, vice chairman and national managing partner, Deloitte Center for Board Effectiveness. "Boards can optimize their diversity by taking intentional actions to expand the pool of women and minority candidates, including reaching out to a broader set of professional networks and considering candidates with a variety of skills, backgrounds, and experiences."
The Alliance for Board Diversity (ABD) and Deloitte utilized a census methodology for the 2018 Board Diversity Census. The Board Diversity Census counts Fortune 500 board directors to provide a measurement of the representation and progress of women and minorities in business leadership and to allow for comparable statistics based not on a discrete list of identical companies but on the Fortune-listed companies in the given years for which the census was conducted.
The Board Diversity Census analyses are based on companies on the Fortune 500 list published in 2018. ABD examined Fortune 500 companies because they are recognized and serve as the most influential businesses in the United States, ranked by revenue each year.
For the purposes of this study, extensive research was conducted to confirm the gender, race and ethnicity of board directors. To ascertain each company's total number of directors and board composition, Deloitte reviewed Securities and Exchange Commission annual filings submitted as of June 30, 2018, including the proxy statements and Form 10-K or Form 10-K/A. For insurance companies that do not submit annual filings to the SEC, Deloitte obtained information from the National Association of Insurance Companies (NAIC) regulatory database of annual statements submitted as of June 30, 2018. Fifteen certain data fields (e.g., board chair, lead director, committee chair) are not typically identifiable in filings from insurance companies. In addition, the annual shareholder meeting had to have occurred by June 30, 2018. If these two conditions were not met, Deloitte referred to the most recent filing that satisfied those parameters. For additional information on the research methodology, please reference the report's appendix.
Additional quotes from members of the Alliance for Board Diversity: Catalyst, The ELC, HACR, LEAP, and Diversified Search
"Diverse boards don't just happen. Smart leaders make them happen. Change can happen if done consciously and deliberately — sponsoring highly qualified women and women of color, and committing to speaking up on their behalf," said Lorraine Hariton, president and CEO, Catalyst. "The Catalyst Women On Board™ initiative, for example, makes powerful connections and brings together women, sponsors and companies to create opportunities and increase diversity in the boardroom."
"Diversity matters. A wide range of voices matters. Leadership matters. This isn't merely good business sense — it's common sense," Dale E. Jones, president and CEO, Diversified Search; director, Northwestern Mutual.
"We are encouraged by the growing number of women and minorities on Fortune 500 boards, but there is still a long way to go," said Cid Wilson, president and CEO of the Hispanic Association on Corporate Responsibility (HACR). "There are too few people of color serving on corporate boards, with Hispanic women board directors at extremely low numbers. Corporate boards must better reflect the growing diversity of their customers, employees and communities. Companies that champion board diversity are more likely to strengthen their brand, operating performance and ultimately valuations."
"We are pleased by the increase in Asian/Pacific Islander (API) representation on corporate boards. APIs are the fastest growing ethnic group in the United States with purchasing power of $986 billion in 2018, up 257 percent since 2000*," said Linda Akutagawa, chair for the Alliance for Board Diversity and president and CEO, LEAP (Leadership Education for Asian Pacifics). "There is a clear business case for bringing in more API directors for companies to benefit from diverse perspectives and have continued business growth."
*API purchasing power was $986 billion in 2018, according to Nielsen's 2018 Asian American Consumer Report, Asian Americans: Digital Lives and Growing Influence
"We are energized to learn that African American women are one of the two largest growing groups on boards as they represent an untapped leadership potential that corporations need to embrace," said Skip Spriggs, president and CEO of The Executive Leadership Council. "Learning that African Americans still hold the highest board recycle rates of all demographic groups is disappointing. This is not a talent issue, but an access issue since a wide pool of qualified African American candidates across all industries exists. Boards must cast a wider net and consider these experienced and skilled candidates for open board seats."