Leadership

Study: Diversity, Experience at Odds on Fortune 500 Boards

By / May 18, 2016

New research by Heidrick & Struggles shows that Fortune 500 boards are more likely to favor experienced leaders over demographics when bringing on new directors. One demographic that’s been left out in the cold by this trend? Hispanics, who are sharply underrepresented on boards.

Roughly one in six Americans is Hispanic, but you’d never know it by looking at the average boardroom.

According to a new study by the executive search firm Heidrick & Struggles, just 4 percent of new directors brought onto the boards at Fortune 500 companies have been Hispanic, a sharp contrast to the 17 percent of the population that Hispanics account for. The statistic is also a decline from 2014, when 5 percent of new board members were Hispanic. In raw numbers, the total stands in even sharper contrast: Just 16 Hispanic board members were appointed this year, out of a total of 399 added across Fortune 500 companies.

In a news release, Bonnie Gwin, vice chairman and co-managing partner of Heidrick & Struggles’ Global CEO & Board Practice, addressed the long-term failure of the executive world to reverse this trend.

“The percentage of Hispanic directors appointed to boards has not improved over the past seven years,” Gwin said in a statement. “We live in a hyperconnected world, and global and domestic markets are changing at a rapid pace—the boardroom needs to reflect that level of change, too.”

The trend is just one highlighted in the latest edition of the Heidrick & Struggles Board Monitor [PDF], which noted that the number of filled board positions added this year was the largest since the study was first launched seven years ago. A few other key highlights from the report:

While the number of newly filled board seats grew, the overall number of board seats fell to 4,698 in 2015, a drop of 300 seats from 2014. Of the seats that were filled, most went to people with top-level executive experience—54 percent were current and former CEOs, while 19 percent had CFO experience.

In most industries, companies prefer board members with backgrounds that match their industries, with industrial (61 percent) and consumer (54 percent) most strongly leaning toward board members with specific industry experience. There is, however, one major exception to this rule: the financial industry, where backgrounds tended to come from the consumer (28 percent), industrial (27 percent), financial (21 percent), and technology (14 percent) sectors.

On other diversity fronts, the results were somewhat better for other demographics. Women, who make up 50.8 percent of the U.S. population, made up 29.8 percent of new board members. While that number still highlights a shortfall, it has improved every year since Heidrick started its study. African-Americans (9.3 percent) and Asians (4.8 percent) were each within 25 percent of their proportional demographics in the U.S.

So what’s creating the demographic imbalance in the boardroom? According to Gwin, it’s the tendency for new board members to be current or former CEOs.

“The focus on board candidates who are sitting or retired CEOs slows the advancement of diversity in the boardroom, because the pool of current and former CEOs is not sufficiently diverse,” she stated in the news release.

Ernie Smith

Ernie Smith is the social media journalist for Associations Now, a former newspaper guy, and a man who is dangerous when armed with a good pun. More »

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