BOSTON – Publicly traded U.S. companies have been slow to add minority directors over the past five years even as women grabbed a greater share of board seats during that period, a comprehensive study to be released on Monday shows.
Across the Russell 3000, a broad index of U.S. companies, 29% now have two or more ethnically diverse directors, 7 percentage points more than in 2016, according to the new data from ISS ESG, an arm of Institutional Shareholder Services, scheduled to be presented at a conference on Monday. By contrast 66% of those boards now have 2 or more women, 27 percentage points more than in 2016, ISS found.
Brett Miller, head of data solutions for ISS ESG, said the figures reflect how boards traditionally recruit directors who have already been top officials elsewhere.
The few minorities who become corporate directors are then in demand, with 30% of the 817 individual Black directors within the index serving on more than one board, compared to a rate of 19% for the 17,810 white directors counted for the study.
“Unless companies expand that recruiting pool you’re going to see the same individuals continuously sought after,” Miller said.
Corporate America’s lack of minority representation has drawn new attention during a nationwide wave of anti-racism protests and activism since the death of George Floyd, an unarmed Black man, in police custody in Minneapolis in May.
Top asset managers have previously focused more of their diversity efforts on gender, not race, although that has begun to change. Minority business leaders have long urged boards to seek candidates from nontraditional backgrounds.
ISS ESG’s Miller said companies have helped limit the pool of obvious director candidates by their slow overall promotion of minorities. He found 84.2% of Russell 3000 companies have no ethnically or racially diverse top executives among their top five executives, down only 1.4 percentage points from 2016.