Global board diversity: traditional thinking holding back progress

While there has been more debate about achieving more diversity on company boards, the Global Board of Directors survey 2016 has found that despite the intense investor and media scrutiny – public company directors are no more diverse that the private companies whose directors participated in the survey.

Traditional recruitment strategies holding back diversity

The survey found that on average, 18% of board members are women, 7% are ethnic minorities and 13% have been appointed in the past 12 months. Opinions vary as to why female representation on company boards is still relatively low. Male directors, especially older respondents, report the “lack of qualified female candidates,” while women directors most often cite the fact that diversity is not a priority in board recruiting and that traditional networks tend to be male-dominated.

However public companies in the survey did have more independent directors than the private companies in the survey – 74% of public company boards were independent against 54% of private company boards. The respondents indicated broad support for term limits and mandatory retirement although approximately only one-quarter of boards have a retirement age and 36% have term limits in place.

The survey drew on responses from more than 4,000 directors from 60 countries, and aims to explore in depth how directors think and operate. Spencer Stuart, the WomenCorporateDirectors (WCD) Foundation, Professor Boris Groysberg and doctoral candidate Yo-Jud Cheng of Harvard Business School and researcher Deborah Bell partnered together on the survey, which claims to be one of the most comprehensive surveys of corporate directors around the world.

The survey found that across all industries and regions, directors rank the economy and the regulatory environment as the political issues most relevant to them. Directors globally express the most concern about regulatory and reputational risks, followed by cyber-security, and less about activist investors and supply chain risks. In general, directors report that their companies are prepared to handle the most important risks, with companies’ level of readiness matching the most concerning areas of risk. However, directors of private companies systematically rank their boards as being less prepared versus public company boards when it comes to such risks.

Diverse boards more risk aware

Almost across the board, female directors report a higher level of concern about various risks to a company than their male peers—from concerns about activist investors and cyber-security to regulatory risk and the supply chain. However, female directors also feel that their companies have a higher level of readiness to address these risks than do their male cohorts.

Susan Stautberg, chairman and chief executive of the WCD Foundation, believes that women directors may be educating themselves more about the potential risks, “We believe that women in particular bring a real thirst for knowledge and curiosity to their board service, and this includes getting up-to-speed on what the real risks are to an organization. All good directors do this, but we think being relatively new to the boardroom can create a greater sense of urgency to learn.”

 

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