Monday November 24, 2014

Low Director Turnover Stalls Boardroom Diversity Efforts

Less board turnover can stagnate diversity efforts.

With board turnover last year hitting the lowest levels in a decade— just 291 of the 5,184 S&P 500 director seats changed—diversity efforts remain stagnant.

Julie Daum

At S&P 500 companies, 64 percent of directors have served on the board for 10 to 15 years, with another 5 percent serving for more than 15 years. Only 17 companies set term limits for directors last year, with none shorter than 10 years. Most turnover is coming from directors reaching the mandatory retirement age, according to Julie Daum, co-leader of the North American Board & CEO Practice and board member at Spencer Stuart. However, more boards are seeking diverse candidates when directors finally do reach retirement, she says.

“We’re seeing a lot more companies considering diversity when they’re looking for a new director. It’s an issue that’s gaining momentum again,” Daum says. “In the past five years, there has been only a 1 percent increase in the number of women in the boardroom, but it’s becoming more of an issue when looking for new directors.”

Along with this momentum inside the boardroom, a number of organizations are looking to diversify from the outside. The National Association of Corporate Directors’ Blue Ribbon Commission on the Diverse Board: Moving From Interest to Action, published last fall, analyzed roadblocks to diversification and how they can be addressed or avoided. Harvard Business School Prof. Boris Groysberg recently launched a course to analyze how countries around the world are addressing boardroom gender diversity and what remedies are most effective. Interestingly, Groysberg’s research has found that women directors’ résumés, on average, have more operational experience than their male counterparts’, and the majority of female board members actively pursued their board role, whereas men were more likely to be offered directorships.

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