Women go backwards in the boardroom

The push to get more women onto corporate boards of directors is getting a lot of attention.

But despite the spotlight, last year saw a fall in the percentage of female directors appointed to the boards of the biggest US companies, after seven years of growth.

A new report from executive search firm Heidrick & Struggles says women were appointed to 27.8 per cent of available director seats at Fortune 500 companies in 2016, two percentage points down from 2015.

“I was actually very surprised,” says Bonnie Gwin, co-managing partner of Heidrick’s CEO & Board Practice, “because there’s a lot of conversation about the importance of diversity, and I think there’s a lot of commitment to it. But at the end of the day, boards lean toward appointing CEOs and CFOs [to fill director positions], and there’s not a lot of diversity in that pool of candidates.”

Boards also tend to lean toward adding operating skills, she says, such as directors who have run business units or held operations posts, which again means a pool of fewer female candidates.

However, that rationale can create a vicious cycle that keeps women from making further boardroom gains, says Natasha Lamb, managing director of Arjuna Capital, an investment management firm that has pushed companies to report on their gender pay gap.

“It’s a chicken-and-the-egg issue,” Lamb says. “We can keep running around this same hamster wheel, saying ‘oh there’s not enough women,’ but that’s not true. Boards just need to change their thinking.”

There were bright spots for diversity in Heidrick’s new report. At tech companies, perhaps sensitive about low numbers of women in leadership roles, 40 per cent of new directors were women, 13.5 percentage points higher than the year before.

The overall decline in new women appointments in 2016 is especially notable because experts say adding a disproportionate number of women when opportunities for change occur — a director retires, say, or a board expands its size and fills a newly created seat — is the only way the total percentage of women on boards will ever grow substantially.

Based on the most recent data, Heidrick pushed out its forecast of when a 50-50 gender split will occur among director appointments to 2032, six years later than its previous prediction.

“In order to move the needle, the percentages would need to be much higher than where they’re tracking today,” says Gwin, noting that in some of the changes, women are replacing women, which would have no net effect. “Certainly, going backwards isn’t going to move it either.”