New data suggests that the newest class of board directors at public companies is the most diverse yet. However, the pattern was uneven, with smaller companies lagging behind their larger counterparts and half of companies adding no new board members, The Wall Street Journal reported Oct. 19.
A study has shown that a third of new board members from S&P 500 companies that disclose demographic information were Black, compared to 11 percent in 2020. Seven percent of new members identified as Latino this year, up from 3 percent last year. Thirty-eight percent of new board members were women, slightly down from last year.
Boards are continuing to push for diversity and are using specialist recruiting professionals to source the best diverse talent. Legislative initiatives are also accelerating the shift toward board diversity, with California imposing penalties for companies without at least one female board director and soon doing the same for those who don't meet racial, ethnic or sexuality demographics. The Nasdaq also has had a proposed rule accepted in which companies must meet minimum diversity requirements or explain why they do not.
A low turnover, though, makes these gains uneven. A report found that 40 percent of S&P 500 companies and half of S&P MidCap and Russell 3000 index companies didn't change their boards in 2021. To combat this, some companies are opting to add board seats instead of waiting for long-standing directors to step down.