Board Diversity: Time’s Up on Good Intentions

by Julie Gorte, Ph.D., Senior Vice President, Impax Aseet Management and Pax World Funds 

When I began working to make boards more gender diverse in 2001, the percentage of women on the boards of large companies in the United States was around 12 percent. By 2011, women had gained a few more seats at the table, and by 2016 women held 21 percent of board seats at Fortune 500 companies. At this rate of progress — less than one percent increase per year — it will be three more decades before big companies’ boards achieve gender parity. And that, sadly, is the good news.

At smaller companies it will take even longer to reach board gender parity at the current rate of progress. In 2016, the average board of a Russell 2000 company had 12 percent women, compared with 20 percent in the S&P 500, and more than one-third of the companies in the Russell 2000 had all-male boards. For minorities, the percentages are even narrower at both large and small companies.

We have known for many years that diverse groups do a better job with decision-making than homogeneous ones. Moreover, there is a great deal of research showing that having more women in decision-making positions is correlated with better financial performance, and often with better risk management and lower risk of insolvency. 

Despite all these findings, the pace of change could be described as glacial, even when “glacial” meant the rate of progress of glaciers before climate change speeded them up. I’ve attended scores of conferences on diversity and heard many CEOs and other senior executives speak compellingly about the benefits of diversity and their own personal commitments to improving it — and then say “but of course, that will happen. We don’t need regulation.”

That was also the thrust of an October 2018 article in the New York Times, “Diversify the Boardroom, Just Not Like California.” The main message: There are better ways to make progress than passing a law, as California did last year, mandating that boards include specified numbers of women by specified dates. 

At Pax World Funds we have been voting against all-male boards for more than two decades and writing letters to each and every company where we do this telling them why.

Read Dr. Gorte's full article here that includes links to her Article Notes -- https://greenmoney.com/board-diversity-times-up-on-good-intentions

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