Closing the Gaps: More Work Needed to Accelerate Gender and Racial Diversity on Fortune 500 Boards according to Heidrick & Struggles' 2019 U.S. Board Monitor
- Women filled 40% of new board seats in 2018, the highest percentage in the 10-year history of the report
- Racially and ethnically diverse new board appointees in 2018 remained at 23%, unchanged from 2017
- Consumer experience for board appointees outpaced financial experience for the first time
May 29, 2019
CHICAGO, May 29, 2019 /PRNewswire/ -- The percentage of women appointed to fill new board seats on U.S. Fortune 500 companies in 2018 was the highest ever at 40%, and a doubling of the percentage over the past decade, according to the 2019 Board Monitor report from Heidrick & Struggles (NASDAQ: HSII), a premier provider of executive search, leadership assessment and development, organization and team effectiveness, and culture shaping services globally.
Heidrick & Struggles' 2019 Board Monitor, the tenth annual study of the trends in non-executive director appointments at the largest companies in the United States, found that U.S. Fortune 500 companies filled a record 462 vacant or newly created board seats with independent directors in 2018, up from 358 in 2017. Of the new seats, a record 183 women were appointed, a 34% increase over the 137 appointed in 2017. Based on the current upward trend, the report projects companies will now reach gender parity among the incoming class of directors by 2023.
While the number of women board directors on Fortune 500 companies has increased steadily overall during the past decade, the total share of seats held by women on these boards in 2018 was only 22.5%. There has been only slight improvement for female appointees at 40% in 2018, following the previous high of 38% in 2017. Racially and ethnically diverse new board appointments in 2018 remained unchanged from 2017's record high of 23%.
"The 10-year anniversary findings in our Board Monitor are significant in that they show the long-term progress of gender, racial and ethnic diversity in the boardroom," said Bonnie Gwin, Vice Chairman and Co-Managing Partner of the CEO & Board Practice. "Companies, now more than ever, are focused on including wide-ranging points of view and experiences by adding greater numbers of women and racially diverse members to their boards. For the first time, we see companies are seeking directors with consumer experience more than any other industry, and this will be an interesting trend line to watch. Taken as a whole, these results are encouraging, but there's still much work to be done to reach gender parity by 2023 and to create more diverse boards."
Additional findings from the 2019 Board Monitor report include:
- Ethnic and racial diversity in 2018 remained unchanged from its previous high of 23% in 2017.
- African-Americans accounted for 11% of new board seats, which more than doubled over the past decade and matched the all-time high from 2017. Ten percent, or 14, of the first-time board appointees in 2018 were African-American.
- The share of new board appointments that went to Hispanics was a little over 4%, down from 6% in 2017. Three percent, or 4, of the first-time board appointees in 2018 were Hispanic.
- Asian and Asian-American board appointments rose to 8%, up from 6% in 2017. Twelve percent, or 17, of the first-time board appointees were Asian or Asian-American.
- Demand for CEO experience hit an all-time high of 60% in 2018.
- One-third – 90 of 276 – of those with CEO experience were women.
- Twenty percent of those with CEO experience were ethnic or racial minorities: 9% African-Americans, 4% Hispanics and 7% Asians and Asian-Americans.
- Consumer experience outpaced financial experience for the first time.
- In 2018, newly appointed directors most frequently worked in the consumer sector (23%), surpassing financial services experience (21%), which had led in the previous four years.
- Consumer boards appointed the largest number of women overall in 2018, although those appointments still totaled only 38% of all new board seats in the consumer industry, down from 47% in 2017.
As part of the tenth annual report, Heidrick & Struggles spoke with current and former women chairs at U.S. Fortune 500 companies across the country who provided their analysis of the potential for increased diversity over the next ten years:
- Cynthia Jamison, chairman of Tractor Supply, said that increasing diversity on boards is "a problem not of supply, but of demand," and that, "boards just need to accept candidates from less traditional roles and functions."
- Jane Shaw, former chairman of Intel, said, "CEOs who have more women on their boards probably have more women in management and know the value of diversity. They are confident enough to handle different leadership styles, orchestrate productive discussions, and achieve the best outcome for the company."
- Elizabeth Tallett, chair of health insurer Anthem, said "Success breeds success—more women on boards equals more women executives and vice versa."
"As boards plan for succession, it's evident that there is still tremendous opportunity to push for meaningful change when it comes to diversity," said Victoria Reese, Global Head of the Legal, Risk, Compliance & Government Affairs Practice. "At Heidrick & Struggles, we're actively working to increase board diversity with our clients globally, and we have pledged that at least 50% of the total number of initial slates of board candidates presented to our clients over the totality of the year will be diverse. Over the past year, 57% of our board placements in North America were diverse, and we're looking forward to continuing to build on this momentum."
Developed in collaboration with Stanford's Rock Center for Corporate Governance, Heidrick & Struggles' board diversity pledge is designed to increase the number of women and members of underrepresented groups considered by boards globally.
About Heidrick & Struggles
Heidrick & Struggles (Nasdaq: HSII) serves the senior-level talent and leadership needs of the world's top organizations as a trusted advisor across executive search, leadership assessment and development, organization and team effectiveness, and culture shaping services. Heidrick & Struggles pioneered the profession of executive search more than 60 years ago. Today, the firm provides integrated leadership solutions to help our clients change the world, one leadership team at a time.® www.heidrick.com
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