The push to get more women onto corporate boards of directors is getting a lot of attention lately: Investors have been urging companies to make it a priority, Uber came under fire after a director cracked a joke about more women in the boardroom, and a Wall Street statue of a little girl aimed at publicizing the lack of women directors became a viral Internet sensation.
But despite the spotlight, the percentage of female directors appointed to Fortune 500 board seats actually declined in 2016, reversing a trend that had shown seven years of growth. According to a new report from executive search firm Heidrick & Struggles, women were appointed to 27.8 percent of director seats that turned over or were added to the boardroom roster in 2016, a slight two percentage-point decline from the year prior.
"I was actually very surprised," said Bonnie Gwin, co-managing partner of Heidrick's CEO & Board Practice, "because there's a lot of conversation about the importance of diversity, and I think there's a lot of commitment to it. But at the end of the day, boards lean toward appointing CEOs and CFOs [to fill director positions], and there's not a lot of diversity in that pool of candidates."
Boards also tend to lean toward adding operating skills, she said, such as directors who've run business units or held operations posts, which again means a pool of fewer female candidates.
The problem with that rationale is it can create a vicious cycle that keeps women from making further boardroom gains, said Natasha Lamb, managing director of Arjuna Capital, an investment management firm that has pushed companies to report on their gender pay gap through shareholder proposals.
For one, companies often select chief executives who have served on an outside board to broaden their governance experience. Yet research also shows that having more women on the board makes it more likely the company will hire women executives. "It's a chicken-and-the-egg issue," Lamb says. "We can keep running around this same hamster wheel, saying 'oh there's not enough women,' but that’s not true. Boards just need to change their thinking."
There were bright spots for diversity in Heidrick's new report: For one, Hispanic directors made gains, particularly at consumer-facing companies such as retailers and consumer-packaged goods firms. And tech companies, perhaps more sensitive to the scrutiny they've received over their low numbers of women in leadership roles, moved in the opposite direction: Forty percent of new directors at tech companies were women, 13.5 percentage points higher than the year before and well above the overall numbers.
The decline in new women appointments in 2016 is especially notable because experts say adding a disproportionate number of women when opportunities for change occur -- a director retires, say, or a board expands its size and fills a newly created seat -- is the only way the total percentage of women on boards will ever grow substantially. While many companies have mandatory retirement ages, the number with term limits capping how long directors can serve remains relatively small, and average director tenure is still more than eight years.
In 2016, 20 percent of all board seats at Fortune 500 companies were women, only a slight change from 16 percent in 2010, according to a study by Deloitte and the Alliance for Board Diversity. Based on the most recent data, Heidrick pushed out its forecast of when a 50-50 gender split will occur among director appointments to 2032, six years later than its last prediction.
"In order to move the needle, the percentages would need to be much higher than where they’re tracking today," said Gwin, noting that in some of the changes, women are replacing women, which would have no net effect. "Certainly, going backwards isn’t going to move it either."