The Equilar Ethnicity Tracker

Tracking Ethnicity on U.S. Boards

May 5, 2022

Amber Gauthier

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Board diversity continues to be at the forefront of corporate governance discussions. In today’s political and social climate, conversations about equality and representation are more important than ever. In 2018, the state of California passed Women on Boards (SB 826), requiring publicly traded companies with principal executive offices in California to meet specific criteria regarding the number of women on their boards. Shortly after, AB 979 was passed requiring the same companies to meet similar requirements regarding directors from underrepresented communities.

Following the implementation of the California legislature, Nasdaq proposed changes to its listing requirements surrounding board diversity. Under the new rules, companies listed on the exchange will need to have either one director who's female and one director from an underrepresented community or disclose an explanation for why they cannot meet that criteria.

“Nasdaq’s new board diversity requirements will help move the needle around greater representation in the boardroom, but corporations and their executive decision-makers must not solely rely on Nasdaq’s criteria simply to meet the status quo,” said Michael C. Hyter, President and CEO at The Executive Leadership Council. “They must go beyond those expectations too in order to guarantee more sustainable and scalable boardroom diversity.”

However, recently on April 1, 2022, a Los Angeles superior court overturned AB 979. The judge justified this action by highlighting that AB 979 was not identifying specific areas where discrimination was occurring. According to the judge, the bill needed to expand on its criteria, perhaps by highlighting areas of discrimination by either geographic region or within specific industries—not a general statement regarding corporate boards within the entire state of California.

With diversity front and center in corporate governance and legislation, Equilar has conducted an analysis on the prevalence of ethnically diverse directors across the Equilar 500 and Russell 3000 indices. The study results show that larger companies are leading the way towards increased board diversity. In this analysis, a director is considered diverse if they identify as either female or ethnically diverse. At the end of 2021, 44.6% of board seats in the Equilar 500 were composed of diverse directors compared to 36.1% of Russell 3000 board seats. Additionally, 21.9% of the Equilar 500 board seats were held by ethnically diverse directors as opposed to 15.1% of the board seats across the Russell 3000.

Figure 1: Prevalence of Diverse and Ethnically Diverse Directors (Russell 3000 and Equilar 500)

During 2021, both Equilar 500 companies and Rusell 3000 companies made strides to increase the representation of ethnically diverse directors. Between Q1 and Q2, the representation of ethnically diverse directors increased almost one percentage point within the Equilar 500, compared to 0.3 percentage points within the Russell 3000. Following this jump, however, the Equilar 500 still continued to increase the prevalence of ethnically diverse directors, but at a decreasing rate, rising by 0.2 percentage points from Q2 to Q3 and 0.1 percentage points from Q3 to Q4, settling at 21.9%.

Figure 2: Representation of Ethnically Diverse Directors by Quarter, 2021 (Equilar 500)

Growth within the Russell 3000 of ethnically diverse directors increased quarter-over-quarter more consistently. After growing by 0.3 percentage points between Q1 and Q2, the prevalence of ethnically diverse directors increased 0.5 percentage points between Q2 and Q3, before slightly slowing with an increase of 0.2 percentage points between Q3 and Q4 to settle at 14.7%.

Figure 3: Representation of Ethnically Diverse Directors by Quarter, 2021 (Russell 3000)

Although representation is not growing exponentially across either index, it is encouraging to see even small increases of ethnically diverse directors across various companies and industries. The increases, though slow, are seen across most underrepresented groups. By the end of Q4 2021, Black/African American (6.2%) Russell 3000 board members were the most prevalent among all ethnicities, followed by Asian/Pacific Islander (5%) and Hispanic/Latino (2.7%). Black/African American directors also saw the largest increase in representation since the start of 2021, from 5.6% in Q1 2021 to 6.2% by the end of the year.

Figure 4: Prevalence of Directors by Ethnicity (Russell 3000)

Despite the slight increase of board members from underrepresented communities, advocates for diversity argue that the glacial pace of growth remains a challenge. "We commend progress that has been made, but a commitment to diversity is incomplete without Latinos, who are two in ten Americans and control over $1.85 trillion of the U.S. purchasing power,” said Esther Aguilera, President and CEO of Latino Corporate Directors Association. “Supply is not an issue. There's ample Latino board talent with extensive business experience from all industries."

Over the last two years, several social justice movements, such as Black Lives Matter, have gained tremendous momentum. The attention to the Black community has grown as a result, including within America’s boardrooms. “The Executive Leadership Council remains cautiously optimistic about the progress in Black board representation,” said Hyter. “There has been a steady incline in Black board representation — especially among Black men board directors. However, Black board directors continue to have a higher “recycle rate” than white males. Boards tend to go to the same small pool of current board members to fill new seats rather than identifying new candidates for seats, a practice which underscores that the pool of Black board prospects is not as broad as the available number of Black executives with the skills, experience, and desire to serve. There remains a stubborn misperception that the availability of qualified Black board candidates is limited, and that it takes a lot of effort to identify qualified Black board candidates. Both of these points are false and continue to hinder and slow progress.”

Anna Mok, President at Ascend Leadership, believes that Asian Americans are often passed over during corporate leadership selection processes. "Despite the strong movement towards a more diverse and inclusive environment for minority corporate board directors, the increase in Asian/Pacific Islander directors has been dwindling,” said Mok. “Our initial study of Fortune 1000 board directors' composition in 2020 revealed that only 4.4% of the directors were Asians and that over 70% of the companies do not have the benefit of an Asian perspective in the boardroom. Equilar's latest report continues the confirmation that Asians are still often overlooked for their leadership potential despite being 12% of the American professional workforce. Ascend Leadership launched our board diversity efforts in June of 2021, called 10X25, to address the lack of representation of Asians and minorities on Fortune 1000 company boards, as well as large private company boards and startup boards. Our mission is to have at least 10% of Fortune 1000 board directors be Asian by 2025 by creating a community and network of Asian directors and executives, developing a strong pool of qualified candidates, and mentoring and elevating the next generation of Asian business leaders."

While challenges remain to increase representation of ethnically diverse board members, an industry analysis of both the Equilar 500 and Russell 300 offers further insight on the state of board diversity. Companies across most industries—with the exception being energy—within the Equilar 500 had at least 40% of board seats composed of diverse directors. Real estate companies within the Equilar 500 surpassed the halfway mark with 53.5% of board seats composed of diverse directors as opposed to only 34.4% at energy companies. Real estate companies also had the highest percentage of ethnically diverse board members at 29.1%, followed by utilities (27.3%) and technology (26%). Once again, energy companies had the lowest representation of ethnically diverse board members at 15.4%.

Figure 5: Prevalence of Ethnically Diverse Directors by Industry (Equilar 500)

The same held true for all Russell 3000 companies. Companies across all industries within the Russell 3000 had at least a third of board seats composed of diverse directors—except energy companies, in which diverse directors held just 29.1% of board seats. Leading the way in the Russell 3000 were utilities companies with 43.2% of board seats held by diverse directors. Utilities companies also led the way with ethnically diverse board member representation at 19.9%, followed by technology companies (19.8%) and consumer defensive companies (18.5%).

Figure 6: Prevalence of Ethnically Diverse Directors by Industry (Russell 3000)

A further industry breakdown reveals that some industries are leading in the representation of one ethnicity while others are leading in the representation of another. Across both the Equilar 500 and Russell 3000, technology companies led the representation of directors who identify as Asian/Pacific Islander, making up 11.8% and 10.6%, of board seats respectively.

Utilities companies also made strides, leading the way in the representation of both Black/African American and Hispanic/Latino directors across the Equilar 500 and Russell 3000. Directors who identify as Black/African American represented 15.4% and 11.7% of board seats for Utilities companies in the Equilar 500 and Russell 3000, respectively, while directors who identify as Hispanic/Latino represented 9.3% and 5.8% of board seats in Equilar 500 and Russell 3000, respectively.

“To drive greater representation on boards, companies can start by assessing the talent they have within, identifying Black executives and people of color in the market who are making contributions, and nurturing relationships in advance of their board openings,” said Hyter. “Developing and nurturing relationships with a broader, diverse pool of prospective board directors is advisable before a specific need arises. Instead of scrambling to fill a slot when a board seat is vacated, there should be a pool or pipeline of candidates that have been identified. In this day and age, there is no excuse for that pipeline to not include ethnically diverse candidates.”

Nevertheless, it’s apparent that certain industries and companies are making greater strides than others in the push for diverse representation on boards. Real estate, utilities and technology companies have seen substantial progress in the representation of diverse directors on their boards, while other sectors still have a long way to go. Additionally, the Equilar analysis shows larger companies are leading the way towards more diverse boards and increased representation of underrepresented communities. With the growing prevalence of social and political issues in today’s corporate world, diversity is sure to remain an important discussion topic in the governance landscape for years to come.


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Amber Gauthier

Senior Research Analyst at Equilar

Amber Gauthier, Senior Research Analyst at Equilar, authored this post. Kelly Stangl and Reina Zhang contributed data and analysis. Please contact Amit Batish, Director, Content & Communications, at abatish@equilar.com for more information or commentary on Equilar research and data analysis.


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