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Although corporate boards have become significantly more diverse over the past five years a new report from The Conference Board and ESGAUGE points to signs this growth may be plateauing. 

The share of female directors in the S&P 500 increased from 23% in 2018 to 32% in 2023, while the reported share of racially/ethnically diverse directors grew from 20% in 2018 to 25% in 2023. Nevertheless, the reported growth in both racial and gender diversity has slowed in the past year.  

The share of reported female directors increased by only 1 percentage point, from 31% in 2022 to 32% in 2023. And the share of reported racially/ethnically diverse directors also remained virtually unchanged, rising from 24% in 2022 to 25% in 2023. 

The report identifies a key factor in the slowdown: The 2023 class of new corporate directors is less diverse in terms of race and gender than the 2022 class. The 2023 class of new directors at S&P 500 companies was 38% female, compared to 43% in 2022. The percentage of racially/ethnically diverse directors among new board members dropped from 45% in 2022 to 36% in 2023. 

“While the reported growth in gender diversity is slowing, the share of female representation on corporate boards has increased meaningfully in the past five years by approximately 10 percentage points in both the S&P 500 and the Russell 3000, demonstrating that companies can, through focused attention, significantly enhance diversity in the boardroom,” said Merel Spierings, author of the report and senior researcher at The Conference Board. 

The report also notes that the actual levels of racial/ethnic diversity may be higher than the reported levels, given the reluctance of some directors to self-identify as being part of a demographic group. 

“Companies that may be underreporting diversity should have discussions at the board level about the benefits of providing more complete disclosure, given that an absence of diversity can open the door to shareholder activism and broader criticism of the company,” said Paul Washington, executive director of The Conference Board ESG Center. 

The report addresses the current state of diversity in boardrooms and provides insights on how to maximize the benefits of a diverse board. It was produced in collaboration with data analytics firm ESGAUGE, along with Debevoise & Plimpton; KPMG; Russell Reynolds Associates; and the John L. Weinberg Center for Corporate Governance. 

Additional findings and insights include: 

  • A majority of Russell 3000 companies (54%) now have three or more female directors compared to 18% in 2018. At S&P 500 companies, 86% now have three or more female directors, up from 47% in 2018. 
  • S&P 500: The share of companies disclosing the aggregate level of racial/ethnic diversity on their boards inched up from 70% in 2022 to 72% in 2023. In the Russell 3000, the share disclosing diversity rose from 36% in 2022 to 41% in 2023. 
  • Levels of racial/ethnic diversity may have plateaued in the Russell 3000, where the share has remained about the same at 21% since 2018. At S&P 500 companies, the percentage of reported racially/ethnically diverse directors has barely increased, from 20% in 2018 to 24% in 2022 to 25% in 2023. 
  • The diversification of US corporate boards is limited by low the level of turnover on corporate boards and the fact that approximately 65% to 70% of the US board-age population is non-Hispanic white. 

“Directors with diverse racial and ethnic backgrounds can bring new viewpoints into the boardroom that enrich boardroom conversations,” said Claudia Allen, senior advisor with the KPMG Board Leadership Center.  “The plateauing of disclosure on director race and ethnicity suggests that in addition to considering the diversity of their board, directors also need to consider whether it is being fully disclosed.” 

To read the entire report, go here.