PJ Neal

Thoughts from a more-than-occasional writer

Directors Failing to Act Is the Biggest Barrier to the Boardroom [People + Strategy]

Despite years of research showing the importance of diversity and inclusion in the boardroom, boards are still failing to bring about meaningful change.

Let’s look at the S&P 500. In 2020, one-third of their boards had two or fewer female directors, falling below the recommended minimum of three. A paltry 27.6 percent of board seats were held by women, and the numbers get worse as you look at leadership roles. Just 25.5 percent of committee chairs were women, 10.7 percent of lead independent directors, and only 4.1 percent of board chairs. While the first two numbers are both up about 7 percentage points over the preceding five years, the percentage of lead independent directors is flat, and board chairs have slightly declined.

When it comes to other forms of diversity, the story is even worse. The percentage of racial and ethnic minorities in the boardroom is only around 21 percent—and virtually unchanged from five years prior. We all too often hear board leaders say that they want to see these numbers change, but that they do not know where to take action or how to bring about meaningful change.

For more than 50 years, our firm has provided guidance to boards on matters of talent and leadership, and we have long advocated for improving the state of diversity, equity and inclusion (DE&I) in the enterprise and in the boardroom. Last year, nearly half of the board directors we placed were women, and a third were racial or ethnic minorities.

Our expertise is bolstered by our extensive research efforts on these topics. Most recently, during the first half of 2021, we partnered with State Street Global Advisors and the Ford Foundation to study of how boards oversee racial and ethnic diversity, equity and inclusion. This research, published in July 2021, painted a vivid picture of what is actually happening in the boardroom, and helped us understand where boards are succeeding and where they are struggling to make progress. It also made clear that boards have a role to play in addressing DE&I in the enterprise and in the boardroom, and provided a roadmap of specific actions.

Here we will discuss four specific failures that companies experience with regard to DE&I. Two of them relate to issues inside the organization that have a significant impact on the director talent pool. The other two are related to how new directors are recruited and become part of the board, organizationally and culturally. All four issues ultimately impact the diversity of the boardroom, and all four are places where we see boards failing to act.

Read the full article, published in People + Strategy, and co-authored with Rusty O’Kelley and Dean Stamoulis.