Diversity drives diversity

From the boardroom to the C-suite

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Incremental changes in gender diversity continued across boardrooms and C-suites at US companies in 2013.

The data reveals that these incremental changes may be transformative over time: putting women on the board and in leadership roles drives further diversification — across gender, tenure and age — in the boardroom and across the executive pipeline.

Key findings

  • Gender diversity accelerates board renewal and diversification. Companies with women on the board are more likely to have added new directors, including more women, to the board.

    Boards that have at least one female director show a commitment to diversity that goes beyond just checking the box: they continue to add more women to the board.

    The portion of companies with just one female director has stayed constant over the past seven years, while the portion of companies with two or more female directors has increased and the number of all-male boards has dropped.

    This suggests that boards that have experienced diversity recognize the value it brings to board decision-making and performance.

Boards with two or more female directors increasingEY chart – boards with two or more female directors increasing, 2013

  • Progress toward gender diversity on boards continues, while gender diversity by industry varies greatly.

    More women are being appointed to boards and to board and executive leadership positions, though change continues to be gradual. There was a notable increase in women taking on board leadership positions as independent chairs and lead directors.

    These roles provide key governance responsibilities, such as authority to set board meeting agendas, call meetings of the independent directors and act as the principal liaison between the independent directors and the CEO.

  • More women are joining public company boards for the first time. Industry experience is the top qualification cited by companies for newly appointed female board members.

    Prior public company board service is not a prerequisite to landing a board seat. Almost half of female directors appointed to boards in the past two years are first-time public company directors, up from previous years.

    Although not a requirement, public board service still remains a top qualification cited by companies. Companies must disclose the particular experience, qualifications, attributes or skills that led the board to conclude that the person chosen should serve as a director of the company.

    The top qualification sought in recent years is expertise in the company’s industry or an industry of strategic importance.

  • Companies with female leaders have more women in executive positions, helping to build the pool of female board candidates.

    Women in CEO and key board leadership roles, including chair of the compensation committee, which often is responsible for management succession, appears to lead to more women in the C-suite.

    This is critical, as the executive pipeline produces future CEOs and board directors, and it is essential to sustaining a large pool of diverse, skilled female board candidates.

    Greater diversity at these levels also sets a tone at the top of inclusiveness, promoting a corporate culture that develops women and supports the careers of future female leaders.

Women in executive positions

Companies with a least one female non-CEO named executive officer

EY chart – women in executive positions, 2013

  • Composition of US boards is poised for change, as a substantial portion of directors are long-tenured or approaching retirement.

    The composition of US boards today reveals a substantial pool of long-tenured directors and directors approaching retirement age. More than 70% of S&P 500 companies have retirement age policies for their directors of 70 or higher; more than half of these have established 72 as the retirement age.

    As these directors reach retirement — and as investors more closely evaluate whether lengthy tenures compromise director— the pressure on boards to refresh their composition will increase.

    Companies in the asset management and real estate sectors appear to have the most directors preparing to exit the board.

For more information

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