By Jeff Green | Bloomberg
White men no longer make up the majority of board seats at the largest US companies, a historic shift reflecting decades of pressure to diversify the upper ranks of corporate leadership.
For the first time, women and non-White men hold just over half, or 50.2%, of the more than 5,500 board seats at S&P 500 companies, according to data compiled for Bloomberg by ISS-Corporate. That compares with five years ago when White men accounted for almost 60% of the directorships.
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The question now is whether the shift is a short-term blip or becomes an embedded adjustment in the makeup of the people who oversee companies. The milestone also comes as political and legal attacks on diversity, equity and inclusion efforts are intensifying.
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“It’s amazing that the shift in boards is occurring at the same time DEI is being dismantled in lots of organizations,” said David Larcker, a professor who studies corporate governance at Stanford Graduate School of Business. “This sets up an interesting experiment: As the White male majority on the board is disappearing, will you see similar changes in the rest of the organization?”
Larcker is referring to the fact that upper management remains disproportionately White and male. Still, the holy grail for diversity advocates has been the tipping point at which women and people of color are able to match the voting power of White men in the boardroom.
Based on the data, that moment happened last year, said Jun Frank, global head of compensation and governance advisory at ISS-Corporate. White men are now a minority at about 57% of company boards, ISS-Corporate reported. More than a dozen S&P 500 companies currently have boards that are majority-led by women, including Coca-Cola Co., Cooper Cos. and Williams-Sonoma Inc., according to data compiled by Bloomberg.
Demographic changes inside boardrooms got a push in 2019 when California passed a law calling for a minimum number of women on boards. The following year, in the aftermath of the murder of George Floyd by a Minneapolis police officer, brought international attention to the Black Lives Matter movement and corresponding adoption of DEI initiatives by many US companies.
What followed was a string of initiatives. Goldman Sachs Group Inc., a leading investment bank, said it would no longer underwrite initial public offerings for companies unless they had diverse boards. Nasdaq Inc. said it would require listed companies to show they had diverse boards or explain why they didn’t.
The largest US asset managers, including BlackRock Inc. and State Street Corp., withheld votes for directors on boards that lacked diversity, and influential proxy advisers such as Institutional Shareholder Services Inc. pressed investors to consider diversity-related issues when casting ballots. ISS-Corporate is a subsidiary of Institutional Shareholder Services.
Then the backlash began. The California board quota law was overturned in 2022 as unconstitutional. Late last year, Nasdaq said it was eliminating the diversity-reporting requirement after an adverse legal decision. This year, Goldman ended the IPO restriction and BlackRock, State Street and Institutional Shareholder Services removed language encouraging board diversity after Trump issued orders to root out what he calls “illegal DEI.”
Despite the recent animosity, women account for 34% of the board seats at S&P 500 companies, Bloomberg data shows. Black directors have about 12% of the seats, becoming the first underrepresented group to reach a level similar to their share of the broader US population, ISS-Corporate reported. By contrast, Hispanic directors, at about 6% of seats, remain far below their estimated 18% share of the population.
White men occupy about 49% of the S&P 500 board seats. That compares with US Census data showing that White men currently make up about 30% of the US population and about 39% of the workforce, according to the Bureau of Labor Statistics.
The US Census projects that the non-White population will become the majority of the country by about 2040. White people will still be the largest single group, followed by the Hispanic population. The Black population is projected to hold steady, according to US Census estimates.
It’s difficult to predict how the shift in director demographics will play out in the boardroom, said Michelle Duguid, an associate professor at the Cornell SC Johnson College of Business, who studies organizational behavior and group dynamics, particularly how social status and power influence decision-making in groups.
The most likely outcome is that because women and men of color currently have majority control over S&P 500 boards, they will have more influence than in the past over who gets considered for future board seats, Duguid said. It’s less clear what it will mean for day-to-day operations at the companies, she said.
A diverse board means that a variety of viewpoints will get consideration, but the goal always centers on achieving the best fiscal outcome for the company, said Deborah Wahl, a former top marketer at General Motors Co. and McDonald’s Inc. and a current director at First American Financial Corp.
“Having a diverse group of people doesn’t guarantee one set of outcomes,” Wahl said. “The priority of board members is to make sure that they’re protecting the company and looking out for shareholder interest.”
–With assistance from Alexandre Tanzi.
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