Fortune 500 Boards Still Decades Away from Representation Parallel to the Presence of Women and Minorities in the US Population
The number of Fortune 500 companies with over 40% diversity on their boards is nearly four times higher than it was in 2010, according to the sixth edition of the “Missing Pieces Report: A 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.
It will take until 2074 – when the U.S. celebrates its tricentennial, before the number of Fortune 500 board seats held by minorities reaches the ABD’s aspirational 40% board representation rate. And while women and minorities have made more progress in board representation for the Fortune 500 between 2016 and 2020 than between 2010 and 2016, the average growth for minority representation on boards since 2004 (the first year this data was collected) is less than 0.5% per year. Fortune 500 board representation for women and minorities continues to climb, up from 34% (1,929 board seats) in 2018 to 38.3% (2,253 board seats) in 2020. Since 2010, the number of companies with greater than 40% diversity has nearly quadrupled.
The social justice movements of 2020 served as a wake-up call for many in corporate America, accelerating the focus for greater gender, ethnic, and racial diversity in the boardroom. As many stakeholders around the country have demanded change, businesses are increasingly expected to serve the workforce and community, as well their bottom line. The business case and benefits of diversity – of background, experience, and thought – are evident, and many companies have listened.
Additional key findings for the Fortune 500 include:
- African American/Black women gained 29 seats in 2020, an increase of 18.8% from 2018. Surprisingly, African American/Black men lost 5 seats in 2020, a decrease of 1.5% from 2018. African American/Black board members hold 8.7% (510 seats) as of June 30, 2020 per the report’s methodology.
- Hispanic/Latino men gained 13 seats in 2020, an increase of 7.7% from 2018. Hispanic/Latina women gained 14 seats in 2020, an increase of 31.1% from 2018. Hispanic/Latino(a) board members hold 4.1% (240 seats).
- Asian/Pacific Islander men gained 33 seats in 2020, an increase of 22.3%from 2018. Asian/Pacific Islander women gained 28 seats, an increase of 45.9% from 2018. Asian/Pacific Islander board members hold 4.6% (270 seats).
- White women made the largest strides, gaining 209 board seats in 2020 for an increase of 20.6% from 2018.
- After a further analysis of variance (ANOVA) of the data from 2016, 2018, and 2020, the impact of placing women and minorities into the positions of board chair and nominating or governance chair can pay immediate and future dividends for the promotion of board diversity.
- While 29 companies demonstrate 60% or greater women and minority representation, no companies in the Fortune 500 are representative of the demographics of the United States, with the benchmarks of 50% women, 13% African American/Black, 18% Hispanic/Latino(a), and 6% Asian/Pacific Islander per the most recent (July 2019) United States Census Bureau, “Population Estimates Quick Facts.”
- The study also showed that boards more frequently will pull from a pool of existing minority board members instead of bringing in new directors. Two out of every five African American/Black board members serve on multiple Fortune 500 boards.
“While we applaud the progress that businesses have made in increasing board diversity, we need to ensure representation is holistic and inclusive for all – not just for one segment of an underrepresented population,” said Linda Akutagawa, chair for the Alliance for Board Diversity and president and CEO, LEAP (Leadership Education for Asian Pacifics).”Despite heightened focus on board diversity the past year, not a single Fortune 500 boardroom is representative of the population of the US.”
Once again, as documented in previous Missing Pieces reports, the Fortune 100 lead the way, exceeding the rate of board seats held by minorities in the Fortune 500, which was close to 18%. The Alliance for Board Diversity initial goal for 40% of all board seats in the Fortune 500 occupied by women and minorities has now been met in the Fortune 100.
Other key findings for the Fortune 100 include:
- In 2020, slightly more than 20% of board seats in the Fortune 100 were held by African American/Black, Asian/Pacific Islander, and Hispanic/Latino(a) members.
- The total number of companies with greater than 40% diversity increased from 46 companies in 2018 to 53 companies in 2020. In other words, over half of companies have 40% of their boards composed of women and minorities.
- The total number of companies with over 50% diversity on their boards has nearly doubled in two years – from 10 in 2018 to 19 in 2020.
- Hispanic/Latino(a) women and Asian/Pacific Islander men achieved the largest percent increase in board seats: 27.3% (three seats) and 20.7 % (six seats), respectively. African American/Black women gained six seats as well, for an increase of 14.3%.
“The Missing Pieces report shows that while considerable progress has been made, and that companies are moving in the right direction in terms of equal representation on boards, there is still work to be done,” said Carey Oven, national managing partner, Center for Board Effectiveness and chief talent officer, Deloitte Risk & Financial Advisory, Deloitte & Touche LLP. “We hope, and encouragingly, are starting to see boardrooms reflect on this information and apply it to ensure a more inclusive process for recruiting not just future board members, but influencing management as well.”
To download the full report, “The Missing Pieces Report: The Board Diversity Census of Women and Minorities on Fortune 500 Boards, 6th edition,” which includes additional data on board diversity in the Fortune 100, Fortune 500 and a list of companies with the broadest diversity on their boards, please visit https://theabd.org/ and www.deloitte.com.
The Alliance for Board Diversity (ABD) and Deloitte used a census methodology for the 2020 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 from year to year, but on the Fortune-listed companies in the given years for which the census was conducted.
Board Diversity Census analyses are based on companies on the Fortune 500 list published in 2020. ABD examined Fortune 500 companies because they are recognized as some of the most influential businesses in the United States. Fortune selects companies for inclusion in or exclusion from the Fortune 500 based on the annual revenue of a company. The companies with the largest 500 annual revenues comprise the Fortune 500.
For the 2020 Board Diversity Census, to confirm individual board members’ gender, race, and ethnicity, Deloitte leveraged a combination of independently verified insight from the Alliance for Board Diversity, third-party data obtained from ESG MSCI, an independent provider of research-driven insights and tools for institutional investors, and ISS Corporate Solutions. To ascertain each company’s total number of directors and board composition, Deloitte reviewed Securities and Exchange Commission (SEC) annual filings submitted as of June 30, 2020, where the annual meeting was also held by June 30, 2020. If these statements were not available or did not list the board of directors, Deloitte leveraged other financial statements, such as S-4/A and S1/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, 2020. Certain data fields (e.g., board chair, lead director, and committee chairs) are not typically identifiable in filings from insurance companies. Additionally, the annual shareholder meeting had to have occurred by June 30, 2020. If these two conditions were not met, Deloitte referred back 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, Deloitte, Diversified Search Group, HACR, LEAP, The ELC
“We recognize the pool of new board directors is more diverse than ever, but progress is slow and will only improve when companies set intentional targets for gender and underrepresented groups on boards,” said Lorraine Hariton, Catalyst president and CEO. “A diverse and inclusive board comes from breaking the habit of relying on the usual candidates, and tapping into various networks to identify board-ready candidates. Without this effort, companies risk falling behind in having a board positioned to address complex challenges.”
“To build sustained long-term change for the better, it will take leadership accountability to achieve equitable outcomes for all identities. One of the best ways to do that is through measurement. That starts with disaggregating diversity data at all levels and assessing equity across all systems. With this data in hand, boards have a critical role to play in holding management accountable.” – Janet Foutty, executive chair of the board, Deloitte US
“Representation matters, and companies that are intentional in their selection of board leadership have proven successful in recruiting other strong diverse candidates. Diversified Search Group recognizes that opportunity begets opportunity, and that leading by example is often the most effective way to bring about real and substantial progress.” – Dale E. Jones, CEO, Diversified Search Group
“The 2021 Missing Pieces Report reveals some progress in overall corporate board diversity. However, the results make clear the necessity of advocacy work from groups like the Hispanic Association on Corporate Responsibility. The report shows that representation for Hispanics and Latinos on corporate boards remains consistently low since 2004, when the Missing Pieces census began. Despite corporate America’s slow progress, I’m encouraged to see that, while still underrepresented, Latinas were the demographic with the second-highest increase in board seats of those surveyed. Our research with ABD will help guide HACR’s initiatives to achieve equity for Hispanics at the highest levels of corporate America.” – Cid Wilson, president and CEO, Hispanic Association on Corporate Responsibility (HACR)
“Anti-Asian hate and systemic racism against communities of color are direct attacks on our core belief that the strength of America lies in our diversity. It is not only urgent for the API community to mobilize the nation to #StopAAPIHate; it is just as important to challenge the corporate community to fill their open board seats to ensure an equitable representation of Asian and Pacific Islanders and other diverse directors. Advancing racial equity and economic inclusion for people of all races, ethnicities, genders and sexual orientation is crucial to ensuring the sustainability of corporate America’s creativity and innovation.” – Linda Akutagawa, president and CEO, Leadership Education for Asian Pacifics (LEAP)
“Board diversity in the Fortune 500 is growing at a rate of 2% which is not quickly enough. On top of that, the recycle rate among Black directors remains high. If corporations are serious about achieving true board diversity, they must be intentional about reaching outside of their traditional networks to tap the plethora of qualified, Black board-ready executives who bring proven talent, innovation, and leadership to the boardroom.” – Michael C. Hyter, president and CEO of The Executive Leadership Council