Women on Boards: 4 Optimistic Reasons We Can Expect More Representation in 2021

Global uncertainty and disruption in 2020 acted as catalysts for change, inspiring boards across the globe to rethink their priorities. Despite the long-winded struggle for gender parity on boards, positive signals indicate actions and mindsets are trending in the right direction.

Women on Boards: Trending in the Right Direction

The pandemic has shone the spotlight on critical social issues, with a strong focus on gender board diversity coming from shareholders and investors. However, there is still a long road ahead for accomplishing gender parity on boards. Board seat turnover is relatively slow, and gender representation on boards is still not up to par, with women only holding about 20% of Fortune 500 board seats. Additionally, women only hold 16.9% of board seats globally. Alas, there is still a staggering amount of work to be done.

However, research suggests that more and more organizations are prioritizing eliminating the gender imbalance on boards and are taking significant action to get more women in leadership roles:

Women gained 187 seats between 2012 and 2016, representing a 20.5 percent increase. By comparison, men lost 235 seats, representing a 5.1 percent decrease during the same time period. This points to the growing recognition within the corporate community that having a diverse board is just as important for robust conversations in the boardroom as it is for the bottom line.

 

Source: Deloitte

While the boardroom might not yet be an accurate reflection of our diverse world, there is cause to believe the groundwork is being laid for better representation. Here are a few reasons why we should be seeing more women on boards soon: 

Increasing Shareholder Pressure for More Women on Boards

To begin, COVID-19 has highlighted the importance of ESG issues in 2020. There has been significant pushback from investors about board gender diversity. Investors are making it clear they want to see more diverse boards in 2021 and are demanding to know why companies haven’t reached their objectives. State legislatures have also carried out new board diversity requirements, including California’s new law AB979, which requires offices to have at least one member from an underrepresented community on their board by the end of 2021. In Germany, parliament passed a law requiring 110 companies to have 30 percent of their non-executive board seats held by women.

During the 2020 proxy season, board diversity was rated as the second-highest priority for shareholders. CEO of BlackRock, Laurence Fink, emphasized the importance of diversity initiatives during the 2021 proxy season. Companies will continue to be held more and more accountable for their company policies regarding diversity quotas and representation in senior roles.

More Transparency and Board Diversity Disclosure

We are raising our expectations, in the context of regional norms, on board and workforce ethnic and gender diversity. In our view, diverse personal and professional experiences support the diversity of mindset that contributes to board effectiveness. This view aligns with our conviction that tone from the top matters as companies aim to develop workforces that more closely resemble the customers and communities they serve.

 

Source: Blackrock’s 2021 Stewardship Expectations 

Regular board diversity disclosure reports are now expected from organizations, increasing accountability and shedding light on where companies stand progress-wise. If companies are dragging their feet in terms of meeting expectations, there will be consequences:

“BlackRock plans to use voting against directors as its “most frequent course of action” at any company it believes is not moving with sufficient speed and urgency on gender and racial diversity during the 2021 proxy season. ”

Not only will be voting be used as an accountability tool, but stakeholders and customers will also be paying close attention to what companies choose to disclose.

More Woman-owned businesses, more women on boards

Next, the increase in women-owned businesses is good news for the future of women on boards. According to Guidant Financial, thirty-one percent of all small business or franchise owners in 2021 are women. This figure is up from 27 percent last year. In addition, 4 out of every 10 businesses are women-owned.

The expansion of the world of women entrepreneurship not only has a great economic benefit but also highlights a need for representation in corporate leadership.

Women on boards: The value is understood

While mandatory quotas help to get more representation in the boardroom, more investors recognize the positive impacts of having more women in the boardroom. Not only does a more diverse boardroom bring more innovation and better decision-making, it also leads to better financial outcomes:

“For companies ranking in the top quartile of executive-board diversity, ROEs were 53 percent higher, on average, than they were for those in the bottom quartile,” according to Mckinsey. 

With the pandemic putting organizations in challenging positions economically, companies cannot underestimate the payoff of building a more equitable and diverse workplace.

Setting the groundwork for gender parity

The pandemic played a significant role in showing companies their weak points, including missed opportunities for diversity. Building more diverse and gender-balanced boards is certain to play a role in how organizations recover in 2021 and beyond. While the road to gender-representation on boards is still very long, there is reason to hope that key players are starting to recognize the urgency in the work that is still left to be done.

    

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