Male, Pale, & Stale? A Comparison of U.S. and U.K. Corporate Boards

02/07/2014 Directors Institute

Several recent analyses have described the American boardroom as “male pale and stale,” in reference to its largely older white male composition. Reuters, Forbes, and MSNBC are among the big names in news who have released articles using this set of descriptors in discussing the slow pace of diversification with respect to age, gender, and race/ethnicity of U.S. corporate directors. These concerns are not unique to the U.S., however. Male, pale and stale have also been used to describe directorship of U.K. companies, from popular media to former finance minister Lord Davies’ own harsh criticism of diversity in FTSE traded companies.

Due to the “special relationship” between the U.S. and U.K. politically and economically, a comparison of the pace of diversification in the boardroom between the two states will help demonstrate whether the progress of diversity in the U.S. is due solely to domestic factors, or whether the same issues we face are experienced in a similar economic power despite cultural differences. This study aims to compare gender, tenure, and age statistics of the FTSE 100 to the top 100 U.S based companies by revenue that are traded on the NASDAQ, NYSE, and NYSE MKT, to see what similarities and differences exist. This data set represents the largest publicly traded companies in the U.K. and the U.S. respectively, and should thus represent the benchmark that companies in general should seek to emulate in each of these states.

The U.S. population as a whole is much more racially diverse than that in the U.K., but both states have roughly equivalent male to female proportions. For ease of analysis, this report will focus primarily on gender, age, and tenure comparisons.

mps graph 1

By percentage, the top U.S. companies have consistently exceeded the top U.K. companies in female directorships since 2008. However, the rate of female directorship growth in the U.K. over the past two years has exceeded that in the U.S., where it seems to have plateaued.

Avg Age DI

The average age of a director at the top U.S. companies has consistently been higher by about one-and-a-half years than that at the top U.K. companies since 2008.

Avg Tenure DI

Average tenure of a director at the top U.S. companies has consistently been about 3 years longer than that of directors at the top U.K. companies. In addition, it appears that further progress is being made in the U.K., as average tenure has fallen since 2010. The ISS recommended maximum for tenure is nine years, which the top U.S. company average has nearly approached.[i]

Overall, the U.S. is ahead in defeating the “male” characterization due to a higher percent of female-held directorships, but falling behind with respect to the “stale” factor due to higher average age and length of tenure. While gender equality on U.S. boards is generally considered a work in progress, it is clear that progress has been made, and that we are excelling in comparison to a culturally and economically similar state like the U.K., at least for the time being.

While the U.S. is staler with both a higher average age and average tenure, neither group of companies is apparently making much improvement. Since 2008, average age has increased at a similar rate between the two groups, rather than decreasing or leveling off. In the U.S., many companies have recently sought to increase the responsibility placed on their boards, which can lead to hiring older, more experienced directors. This is perhaps at odds with the apparent concern of “stale” boards needing greater turnover and a younger generation of directors.

Ultimately, there will likely continue to be some conflict between those who believe a more diverse boardroom with younger directors or greater turnover is the best for governance, and the actual conditions present on boards. There has been some change in the U.S. and the U.K. alike, however, and it will be interesting to see what the future holds for governance here and across the Atlantic.

[i] ISS Governance QuickScore, “A tenure of more than 9 years is considered excessive.”©2013 Institutional Shareholder Services Inc.