We are delighted to bring you the second episode of our mini podcast series on board diversity and how it has progressed over recent years. In this episode, Teresa L. Johnson, Partner at Arnold & Porter Kaye Scholer LLP in San Francisco, joins Partner Emma Bartlett look at best practice examples showing how board diversity is being achieved. Key takeaways include:
- In the UK, it is entirely voluntary and business-led. This has resulted in a strong supply of experienced women leaders and has opened up new career path and opportunities for senior women. We now have valuable insight into workplace barriers and how to fix them – from experience, while you can guess what those barriers are, unless there is some sort of audit some of these assumptions might be wrong;
- Increasing the representation of women in key functional roles such as GC, GC and Co Sec, Finance Director, HR Director and Chief Information Officer, will drive progress;
- Certain FTSE 100 companies have led the way, demonstrating commitment to diversity in a modern company. For example, the Chief Executive for Diageo plc expressed first hand experience of benefits of diversity at board leave in terms of “quality of decision making”, the “varied perspective to debates” and “the performance it drives”. Diageo set goals for 50% of leadership roles to be held by women, as well as increasing representation of leaders from ethnically diverse backgrounds to 45% by 2030. As a result, Diageo now has 60% women on the board;
- Wider stakeholder groups have provided vital support. Certain executive search firms doing the very most to support gender equality on boards have been recognised within the accreditation process under the Enhanced Code of Conduct.
- California started with gentle encouragement for board diversity, but it didn’t move the needle. Setting a quota seems to be making real change – most of the public companies subject to the California board diversity laws have added women and members of underrepresented communities to their boards;
- In most of the US, there are no laws requiring diversity on boards, and the push for diversity comes from the market – particularly institutional investors and investment banks, of late. A recent study from the Alliance for Board Diversity shows that there was a 4X increase in the number of Fortune 500 companies with over 40% diversity on their boards. The pace is different for women and minorities. Not until 2074 will 40% of board seats on Fortune 500 companies be held by minorities. The biggest jump has been in white women joining boards, who have gained 209 board seats between 2018 and 2020.
- California’s quotas are working, but the effect of the quotas isn’t the only reason – public opinion and importantly the investment community has gotten on board. In an ideal world, the quotas will get more diversity on boards, and that will help perpetuate itself.
- It will become the norm, but part of the reason this has taken so long is that boards change slowly – board members tend to serve for long periods of time and boards tend to rely on a closed circle of networks to find new candidates
- Looking at larger vs smaller companies, the Fortune 100 has made more progress than the Fortune 500. In Fortune 100 companies, the representation of women and minorities on boards exceeds 42%. The pace has been slower in the Fortune 500 – diversity has been growing at a 2% pace, and alarmingly the number of board seats held by African American men actually went down.
For more information on the topics covered in this recording, please contact our Partner Emma Bartlett, who specialises in employment and partnership issues for multinational employers, senior executives, partnerships and partners.