Research

Quick Take: Women on Corporate Boards

Dec 21, 2018

THE BENEFITS OF GENDER-BALANCED BOARDS

To Reap the Benefits of Diversity, Boards Need at Least Three or More Women

In 2017, nearly a third (31.5%) of global (MSCI ACWI1) boards had at least three women, up from 27.4% in 2016.2

  • Research from scholars and organizations has found that three women or more are needed to create a “critical mass” of women, which can lead to better financial performance.3
  • Reaching critical mass can change boardroom dynamics substantially and “enhances the likelihood that women’s voices and ideas are heard.”4
  • Boards with at least 30% women offer a positive environment for innovative ideas to spring from gender diversity.5

MSCI also found that companies with fewer women on boards had more than average governance-related controversies.6

Diverse boards have lower volatility, better performance and invest more in research and development (R&D).7

Women have shorter tenures on boards and are less likely to hold powerful leadership positions, such as chair, than men.8

  • Women holding leadership positions on boards is positively associated with the longer tenure of other women directors on the board.9

Recognizing the value of gender-diverse boards, institutional investors are starting to vote against all-men boards in US companies.10

GLOBAL

Although Boardroom Diversity Is Increasing, Women Remain Underrepresented and Progress is Slow

Out of the 2,451 MSCI ASWI Index companies, women held 17.3% of directorships in 2017, up from 15.8% in 2016.11

In Deloitte’s analysis of nearly 7,000 companies in 60 countries, women held 15% of all board seats globally in 2017, up from 12% of board seats in 2015.12

  • While the global number of board seats held by women has only increased 3% in two years, the percentage of women on boards rose nearly 5% in both Canada (to 20.5%) and the UK (to 20.3%).13
  • Companies with a woman chair had nearly twice the number of women on boards than those with men chairs.14
There Are Some Hopeful Signs: Over Three-Quarters of Boards Globally Have At Least One Woman

77.4% of MSCI ACWI companies had at least one woman director in 2017.15

  • Almost a third (31.5%) had boards with at least three women in 2017, up from 27.4% in 2016. 16
Some Countries Are Using Quotas to Drive Up Numbers
Women’s Global Representation on Boards, 2010-2017
Country % Women Directorships, 201717 % Women Directorships, 201018 % With Three or More WOB, 201719 % With One or More WOB, 201720 % With Zero WOB, 201721 Quota and Year Introduced22
Australia 28.7% 10.2% 48.5% 95.6% 4.4% No
Canada 25.8% 12.9% 57.9% 95.8% 4.2% Pending
Finland 33.7% 24.2% 75.0% 100.0% 0.0% Yes, 2008
France 40.8% 12.7% 100.0% 100.0% 0.0% Yes, 2010
Germany 20.9% 10.7% 80.0% 94.5% 5.5% Yes, 2015
India 13.8% 4.5% 13.2% 93.4% 6.6% Yes, 2013
Italy 35.8% 3.6% 100.0% 100.0% 0.0% Yes, 2011
Japan 5.3% 0.9% 0.6% 47.7% 52.3% No
Netherlands 22.1% 13.9% 57.1% 96.4% 3.6% Yes, 2013
Switzerland 21.3% 9.2% 35.0% 97.5% 2.5% Yes23
United Kingdom 26.8% 8.9% 64.3% 100.0% 0.0% No
United States 21.7% 12.3% 39.2% 97.4% 2.6% No

One study of over 90 countries found that those with specific targets, quotas, and penalties for not meeting regulations, including Norway, Iceland, Finland, and Sweden, had nearly double the average percentage of women on boards (about 34%) than countries without those regulations (about 18%).24

CANADA

Over One-Fifth of Board Seats in the Financial Post 500 Were Held by Women in Canada

Women held less than a quarter (22.6%) of FP500 directorships in 2017, only a one percentage point increase from 21.6% of directorships held in 2016.25

Almost half (47.3%) of directors reporting said that their board had a target for increasing women on boards in 2017, up almost ten percentage points from 2016.26

Nearly Half of the TSX Boards Were All Men

Of the 677 companies on the TSX, 45% had zero women in 2016.27

In 2017, just under a quarter (24.9%) of the 715 board seats on the TSX60 were held by women, a slightly higher percentage than the 22.6% of seats held by women in the FP500.28

EUROPE

The EU Is Proposing Quotas to Address Glacial Progress

In 2017, women held just a quarter of board seats in the largest publicly listed companies in EU member states.29

  • Women were 7.1% of board chairs in 2017, which more than doubled from 3.3% in 2012.30

As of late 2017, all French, Italian, and Norwegian companies had a minimum of three women directors on their boards; all of these countries have gender quotas in place.31

The European Commission has proposed legislation to introduce gender quotas to increase the number of women on the boards of publicly listed companies.32

UNITED STATES

Boards in S&P 500 Companies Are Gradually Becoming More Diverse

Women held only 21.2% of board seats at S&P 500 companies in 2016.33

  • Three S&P company boards have zero women directors; one each in pharmaceuticals, the internet sector, and aerospace/defense.34

Most S&P 500 boards are still dominated by men. Only 33% of boards have at least three women directors in 2018.35

  • 87% of S&P500 boards had at least two or more women in 2018, up from 56% in 2008.
  • On average S&P500 boards have 2.6 women directors, up from 1.7 in 2008.

For the first time in 2017, more than half of new directors on the S&P 500 were women and/or people of color.36

  • Women were 36% of new directors.37
  • People of color (men and women) were 20% of new independent directors.38

In 2018:39

  • Women were 40% of new directors.
  • Women of color were 9% of new directors, up from 6% in 2017.
  • Men of color were 10% of new directors, down from 14% in 2017.

Despite this, representation of women and people of color on the S&P 500 continues to be low.

  • Women were only 24% of directors in 2018, up from 22% in 2017 and 16% in 2008.40
  • Only 17% of directors at the top 200 S&P companies are people of color, no change from 2017.41
  • 6.2% of these directors were women of color.42
California Is Implementing Quotas

In September 2018, California became the first state to introduce quotas requiring publicly traded companies to include women on their boards of directors.43

ADDITIONAL RESOURCES

The Case for Gender Diversity on Boards

Organizations

Board Directors Surveys

How to cite this product: Catalyst, Quick Take: Women on Corporate Boards (December 21, 2018).

1. MSCI is an independent research firm that develops global equity indexes; the MSCI ACWI Index contains all sources of equity returns in 23 developed and 24 emerging markets. MSCI, “MSCI ACWI Index.”

2. Meggin Thwing Eastman, Women on Boards: Progress Report 2017 (MSCI, December 2017).

3. Yu Liu, Zuobao Wei, and Feixue Xie, “Do Women Directors Improve Firm Performance in China?” Journal of Corporate Finance, vol. 28 (2014): p. 169-184; Meggin Thwing Eastman, Women on Boards: Progress Report 2017 (MSCI, December 2017); Carolyn Wiley and Mireia Monllor-Tormos, “Board Gender Diversity in the STEM&F Sectors: The Critical Mass Required to Drive Firm Performance,” Journal of Leadership & Organizational Studies, vol. 25, no. 3 (January 2018).

4. Linda-Eling Lee, Ric Marshall, Damion Rallis, and Matt Moscardi, Women on Boards: Global Trends in Gender Diversity on Corporate Boards (MSCI, November 2015): p. 3.

5. Carolyn Wiley and Mireia Monllor-Tormos, “Board Gender Diversity in the STEM&F Sectors: The Critical Mass Required to Drive Firm Performance,” Journal of Leadership & Organizational Studies, vol. 25, no. 3 (January 2018).

6. Linda-Eling Lee, Ric Marshall, Damion Rallis, and Matt Moscardi, Women on Boards: Global Trends in Gender Diversity on Corporate Boards (MSCI, November 2015): p. 2.

7. Gennaro Bernile, Vineet Bhagwat and Scott Yonker, “Board Diversity, Firm Risk, and Corporate Policies,” Journal of Financial Economics, vol. 127 (February 2016).

8. Yaron Nili, “Beyond the Numbers: Substantive Gender Diversity in Boardrooms,” (University of Wisconsin Law School, Legal Studies Research Paper Series Paper No. 1436, 2018).

9. Yaron Nili, “Beyond the Numbers: Substantive Gender Diversity in Boardrooms,” (University of Wisconsin Law School, Legal Studies Research Paper Series Paper No. 1436, 2018).

10. Spencer Stuart, “2017 Spencer Stuart U.S. Board Index,” (2017).

11. Meggin Thwing Eastman, Women on Boards: Progress Report 2017 (MSCI, December 2017).

12. Deloitte Global Center for Corporate Governance, “Women in the Boardroom: A Global Perspective, Fifth Edition,” (December 2017).

13. Deloitte Global Center for Corporate Governance, “Women in the Boardroom: A Global Perspective, Fifth Edition,” (December 2017).

14. Deloitte Global Center for Corporate Governance, “Women in the Boardroom: A Global Perspective, Fifth Edition,” (December 2017).

15. Meggin Thwing Eastman, Women on Boards: Progress Report 2017 (MSCI, December 2017): p. 4.

16. Meggin Thwing Eastman, Women on Boards: Progress Report 2017 (MSCI, December 2017): p. 4.

17. Meggin Thwing Eastman, Women on Boards: Progress Report 2017 (MSCI, December 2017).

18. Linda-Eling Lee, Ric Marshall, Damion Rallis, and Matt Moscardi, Women on Boards: Global Trends in Gender Diversity on Corporate Boards (MSCI, November 2015).

19. Meggin Thwing Eastman, Women on Boards: Progress Report 2017 (MSCI, December 2017).

20. Meggin Thwing Eastman, Women on Boards: Progress Report 2017 (MSCI, December 2017).

21. Meggin Thwing Eastman, Women on Boards: Progress Report 2017 (MSCI, December 2017).

22. Meggin Thwing Eastman, Women on Boards: Progress Report 2017 (MSCI, December 2017).

23. “Parliament Approves Gender Quotas for Big Business,” SWI, June 14, 2018.

24. “Putting Corporate Quotas to Work for Women,” Association for Psychological Science, July 19, 2016

25. Canadian Board Diversity Council, Annual Report Card 2017: Advancing Diverse Leadership on Canada’s Corporate Boards (PhaseNyne, 2017): p. 2.

26. Canadian Board Diversity Council, Annual Report Card 2017: Advancing Diverse Leadership on Canada’s Corporate Boards (PhaseNyne, 2017): p. 19.

27. Vanessa Lu, “Virtually No Change in Getting Woman on Boards in Canada, Stats Show,” The Star, September 28, 2016.

28. Canadian Board Diversity Council, Annual Report Card 2017: Advancing Diverse Leadership on Canada’s Corporate Boards (PhaseNyne, 2017): p. 26.

29. European Commission, “2018 Report on Equality Between Women and Men in the EU,” (European Union, 2018): p. 31.

30. European Commission, “2018 Report on Equality Between Women and Men in the EU,” (European Union, 2018): p. 33.

31. Meggin Thwing Eastman, Women on Boards: Progress Report 2017 (MSCI, December 2017).

32. “EU to Push for 40% Quota for Women on Company Boards,” The Guardian, November 20, 2017.

33. Catalyst, Pyramid: Women in S&P 500 Companies (October 3, 2018).

34. SpencerStuart, “2018 Spencer Stuart U.S. Board Index,” (2018): p. 19.

35. SpencerStuart, “2018 Spencer Stuart U.S. Board Index,” (2018): p. 19.

36. SpencerStuart, “2017 Spencer Stuart U.S. Board Index,” (2017): p. 3.

37. SpencerStuart, “2017 Spencer Stuart U.S. Board Index,” (2017): p. 3.

38. SpencerStuart, “2017 Spencer Stuart U.S. Board Index,” (2017): p. 3.

39. SpencerStuart, “2018 Spencer Stuart U.S. Board Index,” (2018): p. 3.

40. SpencerStuart, “2018 Spencer Stuart U.S. Board Index,” (2018): p. 19.

41. SpencerStuart, “2018 Spencer Stuart U.S. Board Index,” (2018): p. 20.

42. SpencerStuart, “2018 Spencer Stuart U.S. Board Index,” (unpublished data) (2018).

43. Rebecca Aydin, “California Will Require Women on Corporate Boards Under Bill Signed by Brown,” The San Francisco Chronicle, September 30, 2018.

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