After the murder of George Floyd in 2020 and the national protests that it triggered, many of the country’s largest corporations expressed solidarity and pledged support for racial justice and racial and ethnic diversity, equity and inclusion. Some institutional investors also beefed up their proxy voting policies, demanding both greater transparency and more racial and ethnic diversity. One place that companies looked to implement their commitments to DEI was at the board level. Now, about two years after that horrific event, how much progress have companies made? Using the end of proxy season in 2020 as a starting point, ISS has some recent data. ISS concludes that, while substantial progress has been made in board racial and ethnic diversity, “many boards still do not reflect the diversity of their customer base or the demographics of the broader society in which they operate.”
S&P 500. ISS reports that, in 2022, all boards of companies in the S&P 500 had at least one director that identified as racially or ethnically diverse; in comparison, in 2020, 11% of boards in the S&P 500 had no racially or ethnically diverse directors. In addition, in 2022, 36% had three racially or ethnically diverse board members, compared to 22% in 2020. Similarly, in 2022, 31% had four racially or ethnically diverse board members, compared to only 7% in 2020—an increase of 24 percentage points. The percentage of board seats held by racially or ethnically diverse directors grew from 19% in 2020 to 23% in 2022. There were, however, differences among different races and ethnicities. For example, persons identifying as Hispanic/Latin American constituted up 18.5% of the U.S. population (according to the April 1, 2020 census), but held only 4% of S&P 500 board seats in 2020 and only 5% in 2022. African-Americans held 9% in 2020 and 12% in 2022; Asians held 5% in 2020 and 6% in 2022.
Russell 3000. Since mid-2020, ISS reports significant increases in racial and ethnic diversity on boards of large- and mid-cap companies. In 2020, 38% of companies in the Russell 3000 had no racial or ethnically diverse board members; in 2022, that percentage declined to 10%. In addition, while the percentage of companies with one racially or ethnically diverse director increased by three percentage points from 2020 to 2022 (32% to 35%), the percentage of companies with two or more racially/ethnically diverse directors soared by 26 percentage points from 2020 to 2022 (29% to 55%). The percentage of board seats held by racially or ethnically diverse directors grew from 11% in 2020 to 16% in 2022. According to ISS, however, progress among the Russell 3000 “lagged significantly behind their S&P 500 counterparts,” and differences among races and ethnicities were also pronounced. In 2022, only 3% of directors identified as Hispanic/Latin American, compared to just 2% in 2020. In contrast, 7% of directors identified as Asian in 2022, compared to 5% in 2020. African American directors occupied 6% of board seats in 2022, compared with 3% in 2020.