Board diversity disclosures around race and ethnicity increase in US

Are we surprised? Not really. The trend aligns with what markets, investors and regulators like to see – with some exceptions, of course; this is the US we’re talking about. 

Generally, the trends reflect goals under the “S” and “G” heading of ESG – namely, to have companies and the boards that run them better reflect the world around them. 

Here are the details:

The WSJ Pro Research data indicates that:

• 381 S&P 500 companies now disclose the race/ethnicity split on their boards. In 2021, that number stood at 116. 
• The total share of S&P 500 companies opting for what the WSJ deems “full disclosure” – the exact number of board members belonging to each race/ethnicity – now stands at 41%. In 2020, that figure was 6%. 
• From the companies who disclose, the average proportion of non-white representation on boards is 24%. 
• The tech industry is the highest performer at 28%.

There’s no getting away from the importance that stakeholders place on boardroom diversity. 

It’s the mantra of many world governments, large investors like BlackRock Inc., not to mention the general population who consider diversity a critical political topic – both inside and outside the US. 

Because of that, figures like these are hugely relevant. They’re the indicator of progress – or lack thereof – that people want to see.

In this case, it’s not so much about how diverse major corporate boards are; it’s how many are willing to say how diverse they are. 

Disclosure is the critical issue and, as the figures show, it’s rapidly rising. 

A 35% increase in companies opting for full disclosure since 2020 is a significant jump. If that rate continues for the next three years, over three quarters of S&P 500 companies will be willing to divulge their boards’ diversity split by 2026. 

Will it happen as cleanly as that? We can’t be even remotely sure, but it demonstrates the scale of the current surge. 

It’s the million-dollar question, really. Are companies jumping on the disclosure bandwagon simply to please stakeholders? 

It depends on your degree of cynicism when you look at corporate diversity. Yes, disclosure does tick boxes, but it’s often done as part of a stated aim to move boards away from the old-white-male model. 

We can’t say that increased disclosures will automatically diversify boards, but we can say that they will increase public scrutiny of boards to diversify. A company with a poor race/ethnicity split on its board, with no record of trying to change that, will likely attract criticism if it goes public with that information. 

But, of course, a company of this description would probably be less likely to jump on the disclosure bandwagon at all.

Yes – and more stakeholders are starting to see that now. 

Non-diverse boards are hotbeds of groupthink. They likely don’t represent the diverse nature of stakeholders, meaning they will approach ideas from just one mindset, with little criticism or feedback, meaning they could quickly drive the company into a hole or miss out on crucial opportunities. 

In the long run, boards lacking diversity risk serious sustainability issues because they can’t move with the changes in the world around them. 

You can read more about the WSJ figures here.