Women on boards of directors of S&P 500 companies have passed a significant milestone. According to data compiled by Bloomberg, 251 companies – just over half – in the index had at least 30% of female directors in July.
Women gained a net of 13 seats during the month. However, the average number of women directors remained unchanged at 3.3 out of 11 board seats for the entire index.
These results come as index providers and publicly listed companies have been under increased pressure to diversify their boards and make them more gender-balanced.
In early August, the U.S. Securities and Exchange Commission (SEC) approved Nasdaq Stock Market’s board diversity proposal that was filed eight months prior. The exchange requires its member companies to report the number and type of directors in a consistent and comparable way. In addition, the companies will need to have at least one female director and at least one person who identifies as an underrepresented minority or LGBTQ. Those that are not able to comply, will have to explain why.
“Investors are increasingly demanding diverse boards and diversity-related information about public companies,” said the SEC in its statement. “Nasdaq’s proposal should improve the quality of information available to investors for making investment and voting decisions by providing consistent and comparable diversity metrics.”
This diversity requirement is the most significant one since California passed similar laws in 2018 and 2020 for companies that have their headquarters in the state.
While the recent improvements are significant, U.S. companies still lag behind some of their international counterparts. Bloomberg data suggest there were 34% of women on boards of index-listed companies in Australia and 36% in Europe.
U.S. companies with the highest percentage of women on their boards include Omnicom Group, General Motors, Celanese, Bath & Body Works, Hasbro, Ulta Beauty, ViacomCBS, Autodesk, Citigroup, and Cooper Cos. Those with the lowest representation are Charter Communications, Discovery, Monster Beverage, Fox Corp., Motorola Solutions and Paycom Software.
The new board seat gains came from 15 firms, including Goldman Sachs Group, Amphenol and TransDigm Group. The strongest gains were in the utility sector, with AES, FirstEnergy, and Alliant Energy each adding one female board seat.
As of July 1, 2020, Goldman Sachs already announced that it will not underwrite any new IPOs unless they have at least one diverse board member. In addition, as of this year, the investment bank raised this target to two diverse candidates for its IPO clients.
Goldman Sachs’ CEO David Solomon said last year at the World Economic Forum in Davos: “this decision is rooted first and foremost in our conviction that companies with diverse leadership perform better. Consider this: since 2016, U.S. companies that have gone public with at least one female board director outperformed companies that do not, one-year post-IPO.”
He also added that “in addition to the real commercial benefits, it’s clear that changing the stereotypes associated with corporate decision-making will have many positive effects for society as a whole.”
Earlier this year, Goldman Sachs said it doubled its commitment to investing in women-owned companies and those of color to $1 billion. The program Launch With GS was started in 2018 with an initial commitment of $500 million.“Our investment thesis that investing in diverse teams generates positive investment outcomes is embedded across our businesses and will continue to be a cornerstone of our approach,” said Suzanne Gauron, managing director at Goldman Sachs and head of Launch With GS in the announcement. “The strong pipeline of entrepreneurs and managers we’ve met with so far has us even more excited about investing the next $500 million in 2021 and beyond.”