Women and people from underrepresented racial and ethnic groups hold historically high levels of board seats, according to Deloitte’s latest census of Fortune 500 boards: They make up 44.7% of Fortune 500 directors.
Women from underrepresented racial and ethnic groups have gained the most in the past couple of years. In Fortune 500 firms, the increase in the share of directors has been of 47% for African American women, 27% for Asian and Pacific Islander women, and 24% for Hispanic and Latina women, Deloitte reports. Yet, women from these groups still only represent 7.8% of Fortune 500 directors.
For boards to fully understand their company and its operating environment, it is increasingly seen as best practice for directors to mirror the demographic representation of their constituents..
However, boards are still a long way from mirroring the U.S. population, the Deloitte census shows.
People from minoritized racial and ethnic groups represent about 40% of the U.S. population but only 22% of Fortune 500 corporate directors in 2022. Deloitte projects that in the next three decades, the gap will narrow, but not disappear. In 2060, minoritized groups should make up 55.7% of the population and 50,4% of directors, Deloitte projects.
The representation gap is expected to remain especially wide for Hispanic and Latino men and women: They are projected to make up almost 30% of the U.S. population, but to hold less than 10% of board seats in 2060.
In contrast, African Americans and Asian and Pacific Islanders are projected to be better represented on boards than in the general U.S. population by 2030.
And by 2040, women are projected to exceed their proportional representation on board (53.1%) compared to in the U.S. population at large (50.6%) by 2040.
Two Factors To Monitor In Gauging How Quickly Boards Achieve Proportional Representation
Are companies addressing the fundamental obstacles that limit the advancement of women and people from underrepresented racial and ethnic groups into executive roles? This is critical, because boards primarily recruit directors from top executive ranks.
The pressure to diversify boards has led some firms to use a quick-fix approach that accelerates the promotion of women until their “numbers” look right, according to a research from IE Business School (Madrid) and the Wharton School (Philadelphia) that analyzes the advancement of women into executive roles in the Fortune 100 firms. Relying on such tactics for promotions to top leadership positions is unlikely to accelerate the pace of change.
Are companies relying on the same pool of female and underrepresented directors, or inviting new women and minorities to the directorship table?
Earlier this year, Heidrick & Struggles reported that women represent a smaller proportion of new board members at U.S. firms compared to a few years ago. Deloitte also reports that women and people from underrepresented racial and ethnic groups are more likely than average to sit on multiple boards. When women and minorities sit on multiple boards it could reflect a lack of corporate commitment to widening the recruiting pool – and pipeline – for female and minority directors. Alternatively, it could mean “that these groups are being held to a different standard of “required experience” (i.e., previous board service),” Deloitte suggests.
In summary, Deloitte’s latest census shows progress towards board diversity, but also suggests the need for more substantial effort and long-term commitment to address the deep-rooted and structural barriers that impede the pace of change.
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