Gender Diversity on Corporate Boards: The Evolving Context

The recognition of the importance of gender diversity on boards has come a long way over the past decade – but most especially in the past few years. This recognition has come from direct pressure on three main fronts.

1) Quotas: Over the last 10 years, some 10 countries have instituted gender quota requirements for their largest firms. In the United States, California mandated a minimum of at least one female on the board of directors by Dec. 31, 2019. Illinois followed shortly after and New Jersey, Michigan and Pennsylvania have similar bills pending.

Quotas have long been controversial. Some supporters argue that corporations need fines in order to be motivated, as in the state of California or the country of Norway, to change the institutional sexism. Others argue, however, that gender quotas will not help remove entrenched corporate sexism. More of a concern is that they may worsen sexism by perpetuating the stereotype that women need special treatment to succeed.

Perhaps due to the controversy, other forms of pressure have been brought to bear on corporate boards – mainly from stock listing exchanges, the Securities & Exchange Commission and institutional investors.


2) Exchanges/SEC: On December 1, 2020, Nasdaq proposed a requirement (pending SEC approval) that most companies listed on its exchange have at least one woman director and one director who self-identified as being part of an underrepresented minority group. In February 2019, the SEC issued compliance and disclosure interpretations (C&DIs), under Regulation S-K, related to disclosure of self-identified diversity factors such as gender, race, ethnicity, nationality, religion, disability, sexual orientation and cultural background for directors. The C&DIs cover what should be included for directors’ qualifications – 116.11 (Item 401) and director nominee qualifications – 133.13 (Item 407).

The SEC wants the disclosure to include how the nominating committee or board took these diversity factors into consideration. However, the SEC does not require the committee to ask for this diversity information. In other words, if the company asks for this information, then the SEC would require the diversity considerations to be disclosed.

Some members of the US Senate Banking Committee sent this letter to SEC Acting Chair Allison Lee urging the SEC to disapprove Nasdaq’s proposed board diversity listing rule on several asserted grounds, including the proposal’s inconsistency with board fiduciary duties to act in the best interests of the corporation and its shareholders and the principle of materiality, and its expected adverse impact on economic growth.


3) Institutional Investors: Multiple large firms have put direct pressure on firms they invest in to increase the gender balance on corporate boards. Between 2017-2019, the BlackRock, State Street and Vanguard led efforts to increase gender diversity on corporate boards resulted in an 80% increase in the net flow of new female board members. This research demonstrates to some the positive impact of exercising shareholder voice in changing the old boys board culture in the U.S.

According to Spencer Stuart’s most recent board index report in December of 2020, the percentage of women directors in the S&P 500, as a percentage of all directors, rose from 16% in 2010 to 28% in 2020. And, for the first time, it reports 100% of these firms have at least one woman on the board of directors.

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