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Women Poised to Diversify Corporate Boards

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By Michael Cohn
December 3, 2013

A new report from Ernst & Young predicts an increasing number of women will be joining corporate boards.

The report, “Diversity drives diversity,” indicates that the historically glacial pace of board turnover may soon be ready to accelerate as a result of the turnover anticipated among board seats in the next few years. EY’s report foresees increasing diversity in not only the boardroom, but in the top executive ranks of the so-called “C-suite.”

Change seems inevitable. “Gender diversity accelerates board renewal and diversification,” said the report. “Companies with women on the board are more likely to have added new directors, including more women, to the board. The portion of companies with just one female director has stayed constant at 36 percent over the past seven years. However, the portion of companies with two or more female directors has increased to 42 percent and the number of all-male boards has dropped to 22 percent.”

To be sure, while an increasing number of women are being appointed not only to corporate boards, but also to board and executive leadership positions, the pace of change continues to be gradual. Women only make up about 15 percent of board seats, less than the proportion of seats held by directors named John, Robert, William and James.

And yet, more women are joining the boards of public companies for the first time, with 49 percent of female directors appointed to boards in the past two years being counted among first-time directors. Industry experience is the top qualification cited by companies for their freshly minted female board members.

Companies with female leaders also tend to have more women in executive positions, helping to build the pool of female board candidates. Companies that have female CEOs, female independent chairs or lead directors, or female compensation committee chairs are more likely to have women in named executive officer positions. That’s excluding the CEO, a glass ceiling that has all too rarely been shattered.

The report predicts that the composition of U.S. corporate boards is poised for a shakeup, as a substantial portion of long-tenured male directors are approaching their well-overdue retirement years. Men account for 94 percent of the board seats held by directors age 68 and older. EY found that 45 percent of board seats are held by individuals with a tenure of a decade or longer, and 88 percent of these are men. Approximately 27 percent of current board seats could turn over in the next five years.

While progress toward gender diversity on boards is continuing, there is far more variation in gender diversity in some industries. For example, companies in the power and utilities industry have 20 percent female directors, while the consumer products industry and the media and entertainment industry each have 19 percent female directors, giving them the greatest proportion of gender diversity.

In contrast, construction and oil and gas companies have the lowest levels of gender diversity, each with only about 10 percent female directors. Nearly 40 percent of technology companies do not have any women at all on their boards, perhaps reflecting some lingering vestiges of the uber-geeky techie stereotype. Other industries that are most likely to have all-male boards include oil and gas, diversified industrial products and real estate.

To read the full report, visit http://www.ey.com/US/en/Issues/Governance-and-reporting/Diversity-drives-diversity.

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