More Large Companies Are Releasing Board-Diversity Data

The pressure from investors urging companies to disclose information about the racial and ethnic makeup of their boards seems to be having an effect.

The percentage of the 100 largest U.S. companies that release diversity data on their boards of directors has increased by nearly 40% in the last two years. In 2019, 45% of the largest employers in the U.S. disclosed the racial and ethnic makeup of their boards. So far in 2021, 83% of those companies have released that data, according to new research by the advocacy foundation Just Capital. The group says it also expects the number of companies disclosing their board-makeup data to continue to increase until it becomes the standard for all firms.

Getting companies to release this data has been a bumpy ride that has only started to gain traction. Governance groups and advocates for environmental, sustainability and governance policies for years have said companies need to not only diversify their boards but publicly disclose their racial, ethnic and gender makeup. Not until asset management firms, pension funds and other large investor groups began pushing for such disclosures were companies moved to take action, Just says.

“We expect to see the trend towards greater board diversity and disclosure continue as companies respond to pressures from investors, states, and advocacy groups,” Just said in a statement. “As companies continue to participate in the diversity, equity, and inclusion movement, it’s important for them to have a diverse governing body that can hold them accountable to the commitments they’ve made, whether it is to create a more equitable workplace or improve outcomes for communities of color.”

In addition to investor pressure, the group also cites state laws in California and Illinois mandating that companies based in those states diversify their boards, as well as Nasdaq’s announcement that it would require the same for companies listed on its exchange, as other key developments that have helped shift the attitude toward board diversity.

“This alignment on the importance of board diversity is bolstered by insistent investor support, advocacy efforts, and state mandates,” Just said.

The group also acknowledged there is still plenty of work to do. According to its research, nearly two-thirds of the largest 83 companies in the U.S. had boards that were at least 70% white.

“As governing bodies that shape long-term strategy of companies and have the authority to hire and fire the CEO, board members hold distinct power and influence in corporate America. They are also disproportionately white,” the group wrote. “When compared to recent data from the U.S. Census Bureau that indicates approximately 40% of the population is non-white, the majority of these corporate boards are not representative of the U.S. population.”

Just said board diversity numbers will remain low as long as companies benchmark themselves against their peers rather than against representation of the population.

“This translates to lower targets for diversity,” the group said.

Original article

...we find that banks with more gender diversity on their board perform better once the composition of these boards reaches a critical level of gender diversity, corresponding to a board female share of around 13-17 percent.

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