Happy International Women’s Day!
According to the latest Equilar Gender Diversity Index (GDI), based on the current rate of growth, board gender parity for companies in the Russell 3000 is now expected to be achieved by 2048, an advance from the estimate published in the inaugural 2017 GDI, which did not project parity until 2055. At that point, women held only 15.1% of board seats for the Russell 3000, compared to 16.5% as of the end of 2017. Should we cheer?
The number of boards with no women directors has also declined from 25% in 2016 to 20.8% in 2017, Equilar reports. In addition, there were 32 boards with women directors at the 50% level. (Let’s hear it for General Motors—not just a woman as CEO/Chair, but also true gender parity on the board.) Interestingly, smaller companies appear to be lagging; among the Fortune 500, the percentage of women directors at the end of 2017 was 22.5%.
Possibly, Equilar suggests, the new voting guidelines from proxy advisory firms Glass Lewis and ISS may be having some impact. In its 2018 voting guidelines, Glass Lewis advised that, in 2018, board gender diversity will be one of the considerations in evaluating companies’ oversight structures. However, starting in 2019, Glass Lewis will generally recommend votes against the chair of the nominating and corporate governance committee where the board includes no women directors. Moreover, “[d]epending on other factors, including the size of the company, the industry in which the company operates and the governance profile of the company, we may extend this recommendation to vote against other nominating committee members. Also, when making these voting recommendations, we will carefully review a company’s disclosure of its diversity considerations and may refrain from recommending shareholders vote against directors of companies outside the Russell 3000 index, or when boards have provided a sufficient rationale for not having any female board members, or have disclosed a plan to address the lack of diversity on the board.” ISS voting guidelines for 2018 provide that, although it will not make adverse vote recommendations as a result of the absence of gender diversity, it will “[h]ighlight boards with no gender diversity.” In addition, it will vote for proposals requesting reports on a company’s efforts to diversify the board, and will vote on a case-by-case basis on proposals asking a company to increase board diversity.
And perhaps even more significant, suggests Equilar, may be the emphasis placed on board gender diversity by institutional investors such as BlackRock, State Street and Vanguard.