Global Percentage of Women on Boards Rises Slowly

By Melissa J. Anderson (New York City)

Recently released research by Thomson Reuters shows that the percentage of women on boards is rising incrementally around the world. Based on the firm’s database of 4,100 firms, the majority of companies globally have at least one woman on their board.

In 2012 (the last year for which there was data), 59 percent of companies employed a woman board director. But it’s not all good news – that percentage has only risen by three percentage points since 2008, and it didn’t increase at all between 2011 and 2012.

The report [PDF], entitled “Mining the Metrics of Board Diversity,” shows that companies with women on their boards tend to outperform those with no women in terms. They also track better in relation to their index benchmark. Companies with no women have more tracking errors, the report shows, which means those firms may be more volatile.

By now, it’s old news that companies with women directors tend to do better than those without. Andre Chanavat, Product Manager, Environmental, Social & Governance (ESG) at Thomson Reuters, and co-author of the report with Katharine Ramsden, Global Head, Thought Leadership at Thomson Reuters, stated, “This study suggests that the performance of companies with mixed boards matched or even slightly outperformed companies with boards comprised solely of men, further reinforcing the idea that gender equality in the workplace makes good investment and business sense.”

But, as the report shows, while the majority of companies in the study did have women board directors, very few companies had more than one token women. Approaching a critical mass of three or more women on these boards is the result that many companies will still have to keep working toward.

Chanavat said, “Over the past five years significant measures have been put into place to help increase equal opportunity and diversity and while there has been a gradual increase in the percentage of companies that have women on boards, there is still a long way to go.”

Regional Differences

According to the report, only 17 percent of the companies in the sample had a board with 20 percent or more women. This number has gone up only five percentage points from 13 percent in 2008. Almost half (45 percent) say they have 10 percent or more women, up from 39 percent in 2008.

While this increase is small, it is still an increase. Thomson Reuters’ report suggests the increase is mainly the result of regulatory pressure, quotas, and corporate policy. “Adoption of policies and processes to promote gender diversity and equal opportunity increased from 64% in 2008 to 66% in 2012, and is particularly high among the Americas, even without legislation or quotas,” the study says.

There are no quotas stating that boards must have a specific percentage of women. But there are a few rules encouraging the adoption of corporate non-discrimination policy. For example, the SEC ruled in 2009 that public companies would have to disclose in proxy statements how they approach diversity in nominating policies, and the effectiveness of those policies.

These requirements pale in comparison to tougher “comply or explain” laws, like the one in Australia which states that companies on the Australian Stock Exchange (ASX) must set their own quota goals, and then if they are not met, explain why not. While the percentages of women on boards across most companies in the Asia Pacific region were generally low, Australian percentages of women board directors stood out compared to their regional counterparts.

But the most improvement in the percentage of women board directors for the time period (2008-2012) belonged to the EMEA region (Europe, Middle East, and Africa). The report says:

“Companies from the UK and France lead in that respect, driven by regulation: in France, for example, a law passed in January, 2011 requiring companies with more than 500 employees to have at least 40% women on their boards by 2017. Starting in October 2012, the UK Corporate governance code requires companies to report annually on their boardroom diversity policy and to include gender diversity in the evaluation of board effectiveness, also encouraging companies to disclose this information earlier.”

When it came to the question of “Does this region have women on its board?” the Americas and EMEA tended to have pretty close rates across the time period, with both hovering around 70 percent by 2012. But, the Thomson Reuters research shows the boardroom diversity story is deeper than that. EMEA companies tend to have more women on their boards than those in the Americas.

According to the report, about 55 percent of EMEA companies have 10 percent or more women on their board, while less than 50 percent of companies in the Americas do. About 25 percent of EMEA companies have 20 percent or more women on their boards, while less than 20 percent of companies in the Americas do.

This research shows an important distinction: while disclosure regulations may help increase the marginal diversity of a company’s board, it seems that quota and “comply or explain” laws have a bigger impact: firms in regions with these requirements are more likely to have more than one woman director. Which is, unfortunately, still a pretty low bar for diversity.