US progress on board diversity lagging, study finds

Feb 27, 2017
<p><span>Research shows Canada has overtaken the US for female boardroom representation&nbsp;</span></p>

According to new research, the US has moved backwards in terms of boardroom diversity when compared with Canada and Western Europe. Between 2012 and 2016, female representation at board level decreased by 1 percent in the US, but increased by 8 percent in Canada and by 10 percent in Western Europe, leadership advisory firm Egon Zehnder finds.

Women held one in five (18.5 percent) board seats globally in 2016, representing an increase from 14 percent in 2012, according to the study. That places the US slightly above the global average, as female board representation reached 20 percent in 2016 – a 1 percentage-point increase since 2012.

But that comparison benefits from the inclusion of several Eastern European and Middle Eastern countries in the global average, many of which have broader gender issues to reckon with before board representation takes priority. 

Percentage of board positions held by women, 2012-2016

  US Canada Western Europe
2016 20% 25% 26%
2014 21% 18% 20%
2012 19% 17% 16%

Source: Egon Zehnder

In the US last year, one woman was appointed to a board for every three men, once again placing the US exactly in line with the global average of 25 percent female representation of new board members. In Canada and Western Europe, however, women represented 40 percent and 35 percent, respectively, of all new board appointments last year.

The authors of the Egon Zehnder report note that if progress continues at the same global rate as the last two years, gender parity is still 20 years away. In a press release for the report, CEO Rajeev Vasudeva says: ‘A modern organization is only as successful as its leadership’s ability to navigate a near-constant state of change, and the momentum for achieving gender parity is simply not occurring at the pace of progress required.’

IF NOT QUOTAS, THEN WHAT?

Egon Zehnder states that in order for a company to reap the benefits of a diverse board, it should include at least three women. There are at present 10 countries where, on average, boards reach this threshold – and six of those countries have some form of gender quota.

Industry professionals say the prospect of gender quotas is a non-starter in the US, where there is an average of two women on each board. But Karoline Vinsrygg, global co-lead of Egon Zehnder’s diversity council, says the US should look at the UK as an example of a country that has made progress in the diversity conversation without implementing quotas.

‘In the UK there was a positive campaign to have different stakeholders working together,’ Vinsrygg tells Corporate Secretary. ‘There was a broad coalition between chairmen, the business community, the media and shareholders, all with the same outcome in mind.’

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But while the UK’s rate of change has significantly outstripped that of the US, the business community and the government were still motivated by the potential threat of quotas.

Viviane Reding served as vice president of the European Commission between 2010 and 2014, and made gender equality a priority. During her tenure, the UK came under pressure from other EU member states to adopt a change.

Vinsrygg explains that the results achieved in the UK were driven partly by Euro-skepticism and concerns over British sovereignty. ‘Mild pressure often has some good consequences,’ she says. ‘It certainly didn’t hurt to have the EU in the background. It created a ‘don’t come into our back garden and tell us what to do, we’re going to do this on our own’approach.’

But the US isn’t subject to the same degree of international pressure, and quotas aren’t expected to happen. An observer might therefore ask how change could be brought about? In Canada, Prime Minister Justin Trudeau has prioritized diversity, appointing 15 men and 15 women to his cabinet. Egon Zehnder cites his stance as a reason why the country has made so much progress on diversity metrics in the last two years.

Although US President Donald Trump has publicly advocated diversity in business, he is also making efforts to reduce the regulatory role of government. His cabinet picks have also been very much dominated by men. But despite the lack of international or domestic political pressure, Vinsrygg believes it won’t be long before businesses have to take notice in order to stay competitive.

‘There’s a strong case that diverse teams can perform at a higher level than homogenous teams,’ she says. ‘I think we will start seeing shareholders playing a much more active role in questioning boards if they don’t perform on diversity measures.’

Egon Zehnder points to the support The 30% Club (CorporateSecretary.com, 6/24) is gathering in the US as an example of shareholders and chairmen beginning to engage with the subject. 

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