Open Season on Open Seats: Making Progress With Women Leaders on Boards

Meggin Thwing Eastman, executive director of MSCI ACWI Index, says a tipping point for women on boards is close.
Meggin Thwing Eastman, executive director of MSCI ACWI Index, says a tipping point for women on boards is close.

Another year, another year longer to wait.

Predictions are that it will take until 2028  to achieve the goal of 30 percent of  MSCI ACWI Index company board seats filled by women. With the original projection of 2027 to achieve less than a third global representation on company boards, the latest research shows progress is status quo in the U.S., while moving more quickly in other parts of the world.

“We are not accelerating, not falling behind, but it is business as usual,” says Meggin Thwing Eastman, executive director, vice president, head of Impact and Screening Research for MSCI ESG Research. “It’s a reflection of the headwinds women face.”

According to the new report, women held 17.3 percent of all directorships globally at MSCI ACWI Index companies as of October 16, 2017, up from 15.8 percent last year. Among Developed Market MSCI World Index companies, women held 20.4 percent of all directorships (up from 19.1 percent), with women at U.S. companies holding 21.7 percent of directorships (up from 20.3 percent). Women held 10.2 percent of board seats at MSCI Emerging Markets Index companies (up from 9 percent).

“We can’t put it to any one reason,” Eastman says. “We do find when we look at executives, it’s a different picture when a company has women on boards. We don’t know how much pressure there is to do that within each sector.” She adds, “What’s most perplexing is the disparity of women on boards and not really within management.”

Take The Lead has a mission to achieve gender parity in leadership on all levels and in all fields by 2025. Board seats is one measurement of parity.

More than 20 percent of the 2,451 companies studied had all male boards and nearly all still had majority male boards. Seven companies had boards that were majority female, with another 21 divided exactly 50-50, according to the report.

Outside of the U.S. the majority of companies whose boards had at least three female directors were based in developed Western markets. The majority of those with all male boards were based in Japan, South Korea, Taiwan, Hong Kong, and China. In several but not all European countries there were no longer any of these index companies with all male boards.

Companies with a female CEO were more than twice as likely to have at least three women on the board as companies with a male CEO.

“The figure of three is seen as a tipping point,” Eastman said. “Three is a magic number. It is how many members of a group need to be present,” for change, she says.

Countries where there has been real growth in the increase of women in boards and in management is a result of legal mandates, Eastman says. “We don’t see that happening in the U.S.”

Henrietta Fore, former chair of the board of hair of the Board and Chief Executive Officer of Holsman International, a manufacturing and investment company, on January 1 became UNICEF’s seventh Executive Director.

Catalyst’s Women on Board program is aimed at mentoring women for board positions in the U.S. and Canada. Since it’s launch in 2007, Catalyst has worked with 143 companies and 145 non-profits to appoint women to their boards of directors.

Inroads into the CEO’s office continue to be slow, according to the report, but there has been more progress in the CFO position, with a few unexpected bright spots including Thailand, Malaysia, Singapore, and China.

Of the 96 firms with a female CEO, 30 were American, with Taiwan and the UK accounting for another nine each. Fifteen U.S. companies have all male boards and are in the sectors of finance, energy, healthcare, financials and industrials.

“The biggest surprises were geographic,” says Eastman. “If you look at the number of female CFOs in Thailand, it’s not a large number of companies, but they have higher rates, and that is intriguing.”

In several European countries – including both those with and without mandates for female board representation – there were no longer any companies with all male boards. In the U.S., this number had declined to just 15 of 587 firms. But the percentage of firms with all male boards remained high in Japan (52 percent, as well as in many emerging markets countries.

The report shows that 77.4 percent of the companies had at least one female director as of October 16, 2017, up from 75.2 percent in 2016.

Among sectors, Information Technology lags behind the trend of progress for women n boards. Nearly a third, or 28.5 percent of companies have no women on their boards. Only 18 percent ad at least three, while over 40 percent of Utilities and Financials firms had at least three female directors.

Eastman says the process of “board refreshment” is critical, as the tenure of some board members can be up to 30 years. So the opportunity for women to fill open seats on a board is low.

“As older mostly white and male directors retire, those seats come open,” says Eastman, and “those seats are filled by women.

The higher percentage of women filling CFO slots, as compared to CEO slots, Eastman says can be “because it is less of a leap than putting her in the top CEO slot. That’s my hypothesis.“

Despite the slow pace of gains overall, however, there were some notable bright spots in 2017, the report shows. European countries with mandates, including Norway, France, and Sweden, continued to increase female board representation above the level required by law.

Malaysia and India, both with relatively new mandates, saw increases in the percentage of directorships held by women that were considerably higher than the overall emerging markets figure. The US continued to edge upward as well, despite the absence of a formal mandate, with 39.2 percent of firms having reached the tipping point, a gain of more than five percentage points over the previous year.

Eastman says she is personally hopeful.

“There's a strong cultural resistance here, we do not have full gender equality. But the cultural movement now will be a watershed moment, and it’s not just about harassment, “ she says.

“We will see more board advocacy for women in the coming year,” Eastman says.”We are hearing increasing numbers of requests from our clients for data on diversity. It’s a topic of increasing interest to investors.”

Other experts agree. 2020 Women on Boards is a Farient Advisors initiative to reach 20 percent women on boards by 2020.

According to the site, “Shareholders and stakeholders, in general, are pressuring companies to diversify their boards. Several groups promoting gender diversity on boards have set specific diversity goals for public companies. For example, 2020 Women on Boards has set a goal of 20 percent women directors on all U.S. boards, while the 30% Club, started in the UK, is pushing for 30 percent women directors on FTSE 100 boards.”

According to the Farient site, “Today, board attrition rates are in the single digits and pressure is mounting to address gender diversity on boards quickly. Given these models, it’s clear why boards are expanding in size to ensure they are on the path to meeting diversity demands. Short of forced attrition and/or diversity mandates, expanding the board is the most efficient way to accelerate greater gender diversity on boards.“

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