Women Have Made Inroads on Boards — But Progress Stops There

Women are making progress in at least one place: the board of directors. 

But beyond that, gender diversity efforts are looking a lot less rosy. 

In a recent study, index provider MSCI found that while women have started to take a fair share of board seats in companies with established diversity, equity, and inclusion programs, they are still far less present in the C-suite and the general workforce.

Among constituents of the MSCI World Index, slightly more than half (54 percent) of companies with established DEI programs have at least 30 percent of board seats represented by women. Yet only 20 percent of executive managers of these companies are women. The numbers get even smaller in the upper rungs of the corporate ladder: women only account for 15 percent of chief financial officers and 6 percent of CEOs. About 35 percent of the total workforce at these companies are women. 

MSCI defines an established DEI program as one that provides “significant benefits to facilitate DEI or that have set quantitative diversity targets in their recruitment processes.” Among the 1,542 companies in the MSCI World Index, 88 percent have disclosed women’s representation at the executive level, while 73 percent have disclosed the percentage of women in the company as a whole.

Although gender diversity at the board level has improved, “the rate of change has varied year over year,” according to another MSCI report titled “Women On Board – Progress Report 2021.” In 2019, 20 percent of board seats of companies in the MSCI ACWI Index – which captures large and mid-cap stocks in 23 developed and 25 emerging markets – were taken by women, up by 2.1 percentage points in 2018. In 2020, the rate of increase dropped to 1.1 percentage points, “indicating a slowdown in this trend,” according to the report.

The gender board gap is even more glaring in emerging markets. Among companies in the MSCI EM Index, only 17 percent of those with established DEI programs have more than 30 percent of women on the board. 

Board diversity has been a heated proxy voting concern in developed countries — much more so than in emerging markets. That partly explains developed countries’ outperformance in women’s board representation. Marc Goldstein, head of U.S. research at the proxy advisor Institutional Shareholder Services, told II in an earlier interview that ISS has similar proxy voting suggestions regarding board diversity for companies in North America and Europe. “In some European countries, boards are already expected to have at least 40 percent of women,” he said. But in many other parts of the world – even Japan, a developed country – “there are no rules on [diversity] and still plenty of companies have all-male boards.” 

But apart from the outperformance on the board level, developed countries lag just as much as their emerging markets peers in terms of their diversity progress. Among the MSCI EM constituents with established DEI programs, women represent 17 percent of executive managers, 18 percent of CFOs, and 6 percent of CEOs, roughly the same proportion as in the developed countries.

“Comprehensive DEI policies alone have been unable to move the needle on gender diversity in the workforce, although they may have helped (for better or worse) focus companies on improving board diversity,” the MSCI report concluded. It added that diversity-conscious investors should pay more attention to the companies’ actual progress in the general workforce than to anything they say in their DEI statements.