The Search for Diversity in 2021: 5 Trends in the Changing Board Landscape

1. There is mounting external pressure to hire for diverse perspectives

In 2020, we witnessed powerful displays of corporate action aimed at advancing diversity and inclusion. Goldman Sachs announced that they would not take a company public if they did not have at least one female or one non-white board member. Leading U.S. corporations made efforts to combat systemic racism in response to the Black Lives Matter movement. However, 2021 marked a shift towards more top-down regulations.

On January 1st, 2021, a law requiring diversity on the boards of California-based companies went into effect. Washington was the next state to follow suit, and six others have since enacted board diversity measures. In a landmark decision in August 2021, the SEC approved NASDAQ’s board diversity rule, requiring companies listed on the exchange to have two diverse board members by 2023. Recruiting more diverse board members is no longer optional; in many states, it will soon be mandated by law and required to take a company public.

2. Recruiters are looking beyond the C-Suite to find new perspectives

A CEO or CFO title is becoming increasingly less important when it comes to joining a board. Boards are evolving to focus less on shareholders and more on stakeholders given the growing importance of ESG. Accordingly, recruiters are looking to find new perspectives and moving away from more narrow, traditional selection criteria.  

More boards are starting to include thought-leaders on topics like the environment, employee advocacy, and diversity and inclusion. Director skill sets are broadening, meaning that candidates lacking more traditional corporate experiences should not feel trepidation around seeking out board roles. In fact, according to Spencer Stuart’s 2021 Board Index, 74% of recent placements came from outside the ranks of CEO, chair/vice chair, president, and COO.

3. Geography is no longer a barrier to joining a board

Zoom board meetings are here to stay, and geographical distance is no longer an obstacle to joining a board. Companies can leverage this phenomenon to tap into wider, more diverse networks of talent and identify exceptional candidates that may be in a different state than their headquarters.

While there are some downsides associated with less in-person interactions, an HBR report notes that a number of companies found virtual board meetings to be more effective. The researchers cite shorter agendas, more inclusive conversations, and easier access to outside experts as some of the benefits of virtual meetings. ‍

4. 2021 was a banner year for ethnic and racial diversity, but progress was mixed for women

2021 was a year of tremendous progress for racial and ethinic diversity. In fact, a PWC report found that this was the single most important priority in new director searches in 2021, ranking higher than industry and operational expertise.

In terms of placements, 47% of new independent board members for S&P 500 companies were African American, Hispanic, Asian, Native Alaskan, or multiracial. This was over double the share in 2020, when only 22% of new board members came from minority backgrounds.

Regarding gender diversity, progress was mixed. While 47% of new independent directors were female in 2020, only 43% were in 2021. However, when considering the full set of S&P 500 boards rather than new directors, female representation hit an all time high at 30%.

5. Diverse boards start with diversity in the start-up ecosystem

Although boards are starting to incorporate a more diverse set of backgrounds, venture capitalists and former founder CEOs still have an outsized presence in boardrooms. When one considers that 85% of check-writing general partners at VC firms are men, 2.2% of VC investment goes to female founders, and 2.6% of VC investment goes to minority founders, it is no wonder that boards do not reflect the gender and racial diversity of the greater population. In the current landscape, females and minorities make up a tiny minority of the VCs, CEOs, and founders that will go on to serve on corporate boards. While there has been a strong push from both legislators and corporations to promote diversity on public boards, it is important to understand that board diversity starts with encouraging diversity in the early stages of venture capital and entrepreneurship.

The California Partners Project just released a report which shares that women hold just over 29% of CA public board seats in 2021 versus 15.5% in 2018. Page 16 of the report includes a co-signed letter from our founder, Sukhinder Singh Cassidy and John China, President at SVB Capital and founding member of the CPP Board, in regards to the push for better representation on boards of private companies as the next frontier. Only 11% of board seats are held by women and just 3% are held by women of color.

In a 2020 study by Crunchbase, Him for Her, and the Kellogg School of Management about the most heavily funded private US venture-backed companies, it found that 49% of companies that had raised at least $100M had no women on their boards. In addition to the policies we’re seeing for public companies, this movement needs to happen in the start-up ecosystem and more broadly across all private companies.  
Looking Forward

As we look ahead to 2022, it is important to reflect on both the strides made so far and the challenges that remain. While the past year was impactful with the shifts in representation on public boards, we continue to work to increase equitable representation in leadership – across all public and private companies, industries and sectors.

At theBoardlist, we have been dedicated to promoting diversity in boardrooms since 2015 and are excited to continue connecting diverse candidates to leadership opportunities in the upcoming year. If you know of an exceptional diverse candidate, you can refer them to our platform here. And, if you are looking for a diverse board member or executive leader, click here to search our community of over 35,000 members.