Study: Corporate Boards Are More Diverse Than Ever, But Growth in Racial Diversity Among New Directors Is Slowing

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Dec 03, 2024, 09:00 ET

NEW YORK, Dec. 3, 2024 /PRNewswire/ -- Corporate America's boards are more diverse than ever. But racial diversity has recently undergone a marked slowdown. From 2022 to 2024, the share of new Russell 3000 directors who are non-White dropped from 48% to 31%. Moreover, the share of new directors who are Black fell from 26% to 12%.

When it comes to gender diversity, there's a complex picture: While women hold a record level of overall board seats (29%), they hold just 8% of board chair positions.

These findings and others come from a new report by The Conference Board, ESGAUGE, KPMG, Russell Reynolds Associates, and The John L. Weinberg Center for Corporate Governance at the University of Delaware. In addition to providing the latest data and insights on racial and gender diversity, the study also analyzes board skills, qualifications, and evaluations. Highlights include:

Diversity
Data on the new class of directors only reflect those appointed in 2024—not the entire board.

Racial representation dropped significantly in the 2024 Russell 3000 new class of directors:

Non-White directors: From 2022 to 2024, the share of new non-White directors fell from 48% to 31%. This slowdown may reflect progress toward demographic balance and ongoing gaps in representation.
Building the pipeline: "Research consistently shows that boards with a diversity of skills, backgrounds and demographics are more effective. Ensuring a pipeline of diverse talent is not just about representation, it's also crucial for effective board oversight and decision making. Boards can take practical steps to optimize board recruitment by seeking director candidate pools that include diverse leaders, and by advocating for programs that develop high-potential diverse leaders for future board service," said Annalisa Barrett, Senior Advisor, KPMG Board Leadership Center.

Despite less diversity in the 2024 incoming class, overall racial representation is at an all-time high:

Non-White directors: From 2020 to 2024, the share of non-White directors increased from 20% to 26% in the S&P 500. It increased modestly in the Russell 3000, from 21% to 23%.

Women hold about a third of board seats overall, but only about one in ten board chair seats:

Women directors: From 2020 to 2024, the share of women directors increased from 27% to 34% in the S&P 500. It also grew from 21% to 29% in the Russell 3000.
Board chair/leadership positions: Women hold 22% of lead director positions, and 11% of board chair positions in the S&P 500; and 17% of lead directors and 8% of board chairs in the Russell 3000.
Advancing women in leadership roles: "The share of female directors is at record levels, and the growing presence of women on boards has expanded the pool of candidates with the expertise, tenure, and relationships required for leadership roles. At the same time, boards may want to consider reassessing and refining their diversity hiring strategies to ensure continued momentum," said Andrew Jones, coauthor of the report and Senior ESG Researcher at The Conference Board.

Qualifications and Skillsets
More Russell 3000 directors are coming from the C-Suite (non-CEOs) or below—a departure from the CEO-heavy trend:

C-Suite executives: From 2020 to 2024, the share of active or former C-Suite executives (non-CEOs) increased from 14% to 18%.
Below the C-Suite: The share of directors who sit below the C-Suite grew from 17% to 21%.
Talent pools are expanding: "Sitting and former CEOs will always be in demand in the boardroom, but the trend this year in appointing non-CEOs, and more junior executives with deep expertise in certain areas, may indicate that boards are either trying to balance out the mix of expertise in the boardroom, or are trying to get ahead of emerging trends," said Richard Fields, Head of the Board Effectiveness Practice at Russell Reynolds Associates.

As geopolitics intensifies and cybersecurity threats escalate, there's growing demand for directors with experience in these areas:

International experience: From 2020 to 2024, the share with international experience increased from 40% to 51% in the S&P 500. It also grew in the Russell 3000 from 22% to 29%.
Cybersecurity: From 2020 to 2024, the share with cybersecurity experience grew from 13% to 25% in the S&P 500. It grew from 7% to 16% in the Russell 3000.

Overboarding
Corporate America is cracking down on overboarding:

Overboarding policies: From 2020 to 2024, the adoption of overboarding policies grew from 68% to 81% in the S&P 500. It also grew in the Russell 3000, from 44% to 53%.
Growing scrutiny: "The increase in overboarding policies reflects heightened investor engagement from certain institutional investors and pressure from both dominant proxy advisory firms," said Lawrence A. Cunningham, Director of The John L. Weinberg Center for Corporate Governance at the University of Delaware.

Evaluation and Accountability
Amid heightened board scrutiny, performance evaluations and independent assessors are gaining momentum:

Full board evaluations: From 2020 to 2024, the share of companies conducting full board, committee, and individual director evaluations increased from 43% to 55% in the S&P 500. The share grew from 24% to 38% in the Russell 3000.
Independent assessment facilitators: From 2020 to 2024, the use of independent assessment facilitators increased from 21% to 37% in the S&P 500. It grew from 10% to 17% in the Russell 3000.
More boards embrace external perspectives: "The move toward more comprehensive board evaluations marks a significant shift in governance practices. While most companies rely on in-house programs for director orientation and education, we're seeing a growing recognition that external perspectives can be valuable," said Umesh Tiwari, Executive Director of ESGAUGE.

Note: Findings are based on public disclosures by Russell 3000 and S&P 500 companies up to October 23, 2024.

About The Conference Board
The Conference Board is the member-driven think tank that delivers Trusted Insights for What's Ahead™. Founded in 1916, we are a non-partisan, not-for-profit entity holding 501 (c) (3) tax-exempt status in the United States. www.ConferenceBoard.org

About ESGAUGE
ESGAUGE is a data mining and analytics firm uniquely designed for the corporate practitioner and the professional service firm seeking customized information on US public companies. It focuses on disclosure of environmental, social, and governance (ESG) practices such as executive and director compensation, board practices, CEO and NEO profiles, proxy voting and shareholder activism, and CSR/sustainability disclosure. Our clients include business corporations, asset management firms, compensation consultants, law firms, accounting and audit firms, and investment companies. We also partner on research projects with think tanks, academic institutions, and the media. www.esgauge.com

About KPMG
The KPMG Board Leadership Center (BLC) champions outstanding corporate governance to drive long-term value and enhance stakeholder confidence. Through an array of insights, perspectives, and programs, the BLC—which includes the KPMG Audit Committee Institute and close collaboration with other leading director organizations—promotes continuous education and improvement of public and private company governance. BLC engages with directors and business leaders on the critical issues driving board agendas— from strategy, risk, talent, and sustainability, to data governance, artificial intelligence, audit quality, proxy trends, and more. Learn more at www.kpmg.com/us/blc .

About Russell Reynolds Associates
Russell Reynolds Associates is a global leadership advisory firm. Our 500+ consultants in 47 offices work with public, private, and nonprofit organizations across all industries and regions. We help our clients build teams of transformational leaders who can meet today's challenges and anticipate the digital, economic, sustainability, and political trends that are reshaping the global business environment. From helping boards with their structure, culture, and effectiveness to identifying, assessing and defining the best leadership for organizations, our teams bring their decades of expertise to help clients address their most complex leadership issues. We exist to improve the way the world is led. www.russellreynolds.com

About The John L. Weinberg Center for Corporate
The John L. Weinberg Center for Corporate Governance was established in 2000 at the University of Delaware and is part of the Lerner College of Business and Economics. It is one of the longest-standing corporate governance centers in academia, and the first and only corporate governance center in the State of Delaware, the legal home for a majority of the nation's public corporations. The Center's mission is to provide a neutral forum for business leaders, members of corporate boards, stockholders, the judiciary, the legal community, academics, students, and others interested in corporate governance issues to interact, learn and teach, with the goal of positively impacting and improving the field of corporate governance and the capital markets. The Center is recognized as a thought leader in the corporate governance field.
www.weinberg.udel.edu

SOURCE The Conference Board