February 12, 2018
Diversity on boards of directors at public companies is at the forefront of the corporate governance world. At the current rate, gender parity on Russell 3000 boards will be achieved by 2048, and that pace has been quickening in recent years. Companies have been pushed by shareholders and activists to speed up the process even further, but there has not been a single way to meaningfully accelerate changes in board diversity.
An Equilar study looked for possible correlations between the number of women serving on a company's nominating and governance committee of the board and the amount of women on the board of directors. Since the nominating and governance committee oversees potential director nominees as well as the entire board's compliance with corporate governance regulations, having a gender-diverse committee may lead to a more gender-diverse board.
The chart below shows the number of women on the nom/gov committees at Russell 3000 boards, identified by the number of women on their boards overall. A vast majority of companies had either zero or one woman on their nom/gov commitees. Just over half of Russell 3000 companies-51.0%-had zero women on their nom/gov committees. Of those, nearly half had zero women on their boards (22.9% of the entire Russell 3000 at the time of the study), and therefore obviously would have no women on any committees. Meanwhile, 36.2% of Russell 3000 companies had one woman on their nom/gov committees. As the color breakdown in the chart shows, however, the number of women on boards varies whether or not companies had women on the nom/gov committee. Indeed, over 10% of Russell 3000 companies had two or more women on their boards when there were no women on nom/gov committees.
Nearly one-quarter of all companies had all women directors who were on the board also serve on the nom/gov committee (17.7% were boards with one woman, 6.2% were boards with two women and 0.9% were boards with three women.)
To the question of whether the presence of a woman on the nom/gov committee influences the number of women on the board, a regression analysis does show a correlation that once a Russell 3000 company added one female to their board's nom/gov committee, it was more likely to have multiple women directors.
Overall, there was a higher count of female board members at companies with one woman on their nom/gov committees than at companies without any females on the committee. And once a company added a woman to the nom/gov committee, the effect a female nom/gov member has on the addition of another woman director, holding all else constant, hovers around 37%. This suggests that electing more women to a company's nominating/governance committee plays a role in increasing female directorships outside of the committee itself.
There could be multiple factors at play. This could be the result of a select group of companies having a women-positive culture or women in leadership positions that cause a ripple effect. Additionally, it's possible these female nom/gov committee members are suggesting the board nominate qualified women within their director networks, or at very least, are encouraging the appointment of more female directors. Of course, this is also simply a correlation analysis, and these factors remain speculation as far as any individual company is concerned.
The study also revealed a disparity in gender diversity on boards between different sectors. For the past fiscal year, the utilities sector had the largest representation of female nom/gov committee members. Within the utilities sector, women accounted for 24.8% of the total count of nom/gov committee members. The services sector followed closely with 22.7% of all nom/gov committee members being female, while the basic materials sector had the lowest female representation in the Russell 3000 at only 14.7% in 2017.
The idea that electing women to a company's nom/gov committee increases the potential for additional female directorships has surfaced among leaders in corporate governance. For example, when referencing an ISS analysis of the proportion of women directors and participation on key committees, Georgina Marshall, Global Head of Research, said, "These numbers also suggest room for improvement in appointing women directors to nominating committees, which may help ensure the continued identification and selection of qualified female director candidates." Even so, the Russell 3000 has a long way to go until it can claim equal gender representation in its boards.
Hailey Robbers, Research Analyst, authored this post. Please contact Dan Marcec, Director of Content & Communications, at firstname.lastname@example.org for more information on Equilar research and data analysis.