Diversity in the Boardroom: Where do we Stand?

01/05/2014 Directors Institute

Directorship in the S&P 500 this year is about 82% male and 84% white, with an average age of about 63.[i]  Efforts such as the diversity requirement introduced in the 2002 Sarbanes-Oxley Act and revised in the 2010 SEC diversity disclosure rules have resulted in increased racial and gender diversity, but there is a general consensus that diversification of the workplace is a work in progress. Recent publications with titles like “Male Pale & Stale”[ii] capture the sense that progress towards boardroom diversity in the U.S. has been lackluster, and recent research released by groups like Catalyst has quantified disparity in the U.S. and abroad.

But what does equality look like, and how will we know when we have achieved it?

This brief study aims to take a direct look at how men, women, and racial/ethnic groups stack up, by comparing their respective representations in the overall population, workforce, senior management/executive roles, and director positions. If we consider equality as a relatively equal ratio between representation in the overall population and different industry segments, the data sets take on a different meaning. By comparing gender and racial/ethnic groups this way, we can get a clearer picture of what equal representation looks like.

Racial and Ethnic Diversity

Figure 1: Representation of each racial/ethnic group by percent of total.

“dir”[iii] is percent of total directors, “pop”[iv] is percent of overall U.S. population, “work”[v] is percent of U.S. workforce, and “exec”[vi] is percent of total senior management and executive positions. “Exec” data is only available for the 2010 and 2012 datapoints.

Figure 1 shows the raw data, and gives a general sense of how the different groups compare. For example, seeing that a particular workforce segment is below or above the overall population line indicates that group is less or more represented, respectively.

By taking this data and normalizing each subset against the larger population or subset it composes, we can get an even clearer picture of how representation of different racial and ethnic group compares (see Figure 2 below).


Figure 2
: Workforce figures normalized by population, and Director and Executive figures normalized by Workforce for 2012 data.

By subtracting the workforce percentage for each group from that group’s percentage of the population, we can compare that value for each group with one less variable. Similarly, by subtracting the Director Seats and Executives values from the respective Workforce population, we get a clear representation of how different groups stack up among the working portion of the population. This prevents the non-working portion of any population from swaying the Director Seats and/or Executive disparities.

By subtracting the workforce percentage for each group from that group’s percentage of the population, we can compare that value for each group with one less variable. Similarly, by subtracting the Director Seats and Executives values from the respective Workforce population, we get a clear representation of how different groups stack up among the working portion of the population. This prevents the non-working portion of any population from swaying the Director Seats and/or Executive disparities.

By normalizing the director seats, workforce, and executive positions values for each race against their respective percentage of the overall U.S. population, the extent of racial disparities in each area is easier to compare. The zero value represents an exact proportional match of that racial group’s representation in the respective field to its representation in the overall population in 2012.

The similarity in representation in executive positions and director seats for each respective group is likely a reflection of the tendency for director positions to be filled by people with senior executive experience. Since executive roles often act as a “feeder” for director seats, boardroom diversity may follow naturally from diversity in executive positions.

Gender Diversity

Figure 3: Representation of each gender group by percent of total.

Figure 3 shows the raw data for 2012. Since there are only two groups, the data can be easily compared by looking at the difference between each respective value. The following graph takes advantage of this data feature, by showing the difference in representation between the two genders.

 

Figure 4: Difference of Workforce figures normalized by population, and difference of Director and Executive figures normalized by Workforce

By subtracting difference in the workforce percentage for each gender from that gender’s percentage of the population, we can compare that value for each group with one less variable. Similarly, by subtracting the difference in Director Seats and Executives values from the respective Workforce population, we can get a clear representation of how each gender compares among the working portion of the population. This prevents the non-working portion of either gender from swaying the Director Seats and/or Executive disparities. In each difference calculation, male is the higher value, and female is the lower value.

By normalizing the director seats, workforce, and executive positions values for each gender against their respective percentage of the overall U.S. population, the extent of gender disparity in each area is easier to compare. The zero value represents an exact proportional match of the respective field to each gender’s representation in the overall population.

We can see that the difference between male and female representation in the board room and executive positions decreased between 2010 and 2012, but there is still a significant difference in representation.

 

[i] Spencer Stuart Board Index 2013
[ii] Reuters 2013
[iii] “dir,” data set represents the Fortune 100, and is reprinted with permission from Catalyst, The Prout Group, The Executive Leadership Council, and the Hispanic Association on Corporate Responsibility.
[iv] “pop” data set is from the U.S. Census.
[v] “work” data set is from the U.S. Equal Employment Opportunity Commission.
[vi] “exec” data set is from the U.S. Equal Employment Opportunity Commission.