A push to get more women on U.S. boards has slowed this year, raising concern among recruiters that some firms may have “ticked the gender box” by hitting minimum levels of female representation or moved on to focus on other diversity issues.
Improving boardroom diversity has become a focus for many investors who say having a broader range of experiences around the top table improves decision-making and corporate cultures.
But new data and interviews show that’s not the only priority at many companies. Figures that researcher Equilar shared with Reuters showed women made up a smaller share of new directors who joined company boards in the first two quarters of this year, accounting for around 40% of new directors in both timeframes.
The figures undo a rising trend seen in 2021 when women accounted for 41% of new directors in the first quarter and 47% of new directors in the second quarter.
The figure then rose to 48% for the last two quarters of 2021, the highest share since Equilar began tracking companies on the Russell 3000 index in 2017.
new directors as recently as mid-2020. The total share of women directors among the Russell 3000 has risen steadily.
Equilar, and a number of recruiters, said the slowing pace in part reflects boards turning their attention away from gender equality to racial equality, instead of focusing on both.
Boards are “focusing on diversity beyond gender,” said Equilar Director of Research Courtney Yu, especially if they already include at least one woman as required by Nasdaq Inc (NDAQ.O).
Equilar said 67 Russell 3000 companies had no women on their boards as of June 30 and 443 companies had just one woman, down from 633 such companies a year earlier.
Beth Stewart, CEO of search firm Trewstar Corporate Board Services, said some boards also may have reached level where a third of members were women – the goal of activists like the 30% Club – and then shifted their attention as they recruit other new directors.
In addition some white male directors think they have enough diverse candidates, she said. “There’s been a little revolt going on among white men,” Stewart said.
Pressure to add women eased in May when a California judge struck down a state law mandating boardroom gender diversity.
It’s unclear how the dynamics have affected minority boardroom representation, for which current Equilar data was not available.
Among bigger companies in the S&P 500, which tend to have more diversity, women accounted for 46% of new directors according to security filings through April 30, up from 43% a year earlier, said recruiting firm Spencer Stuart.
Ethnic or racial minorities accounted for 46% of new directors in the latest period, down from 47% a year earlier, the report said. As in previous years, more new minority directors were men than women.
Limiting change is that many boards add just one director a year, said Keith Meyer, a practice leader with recruiting firm Allegis Partners. Few U.S. boards have the term limits common in Europe, and many have done away with age limits.
“A reason U.S. boards are very stagnant is there’s no easy exit path,” he said.
Meyer said an easy fix would be for boards to expand their rosters. That is what happened at the start of the year at Houston-based food service distributor Sysco Corp, (SYY.N) which created three new board seats and named two women among new directors.
A Sysco representative said the company “continues to prioritize efforts to advance diversity, equity and inclusion across all areas of the company and on the board of directors.”
Some companies have cited obstacles to diversity including costs or challenges of finding suitable candidates amid much competition for women and minorities. One, casino operator Red Rock Resorts Inc (RRR.O) in an April securities filing said all five of its directors are white men.
While the company values diversity, Red Rock said it also must consider the cost of adding directors. Further the limited pool of potential directors willing to subject themselves to the rigors of obtaining a gaming license “and the demand for qualified diverse candidates will continue to impact our ability to attract certain categories of diverse directors,” the filing states.
A Red Rock spokesperson declined to comment further.
Wall Street bank Wells Fargo & Co (WFC.N) expanded its board and named three new directors this year including two women, one of whom is African-American.
Celeste Clark, a member of Wells Fargo’s nominating committee, said in looking for diverse candidates it aimed to “widen the aperture” to consider executives from nontraditional executive roles, not just people who have been CEOs or CFOs of other companies.
“Recruitment of racially and gender-diverse candidates doesn’t just happen,” Clark said.