Board Diversity: Progress and Potential in 2024

Black History Month offers an opportunity to celebrate gains in board diversity in recent years and drive continued progress. Such gains have been significant over time: according to the 2023 US Spencer Stuart Board Index, last year 67 percent of new directors were diverse (defined as women, underrepresented minorities, or LGBTQ+) compared to just 38 percent in 2013.

Leading boards continue to find value in bringing diverse perspectives to the boardroom. They are experiencing firsthand the benefits that diversity brings to board decision-making and effectiveness.

As we advance into the new year, boards should embrace the potential to build on the progress that has been made. The various forces driving boards to diversify will continue to provide momentum.

Factors Keeping the Pressure on Board Diversity

• Expectations of institutional investors. One of the strongest forces driving change in corporate boardrooms is investors. A January 2024 EY Center for Board Matters review of the publicly available proxy voting guidelines of the world’s 20 largest asset managers found that diversity is considered in 88 percent of director voting policies. When boards don’t meet those expectations, nominating and governance committee members may face opposition to their reelection.
• Talent strategy in a tight labor market. Global talent shortages will require a diverse workforce to meet critical talent needs, and workplace culture and values that embrace diversity, equity, and inclusion (DE&I) will appeal to younger workers. The tone around a company’s commitment to DE&I must be set by the board, which oversees talent strategy and reflects the company’s diversity commitment through its composition.
• Understanding customer nuance. Having board members whose personal experiences and perspectives enrich their understanding of the company’s customers is important, both in terms of business development and risk management. Boards can remove potential blind spots in their oversight through enhanced diversity and inclusive boardroom discussions on complex challenges and business opportunities.
• Regulatory and policy developments. Although California board diversity legislation was struck down by the state’s court, it was effective in urging companies to add diverse members to their boards, and ongoing policy developments will continue to bring board diversity to the forefront of board priorities. For example, Nasdaq-listed companies must now have diverse directors on their boards or explain why they do not, and the US Securities and Exchange Commission’s current rulemaking agenda includes board diversity disclosures.
• Diversity’s impact in the boardroom. Directors themselves recognize the benefits and are often outspoken proponents of diversity. When boards add a director categorized as diverse, they usually don’t stop at one. EY data show that the percentage of S&P 1500 boards with three or more women increased from 35 percent in 2019 to 68 percent in 2023. This is not simply an exercise in checking the box. Diversity generates further diversity as directors experience its value. This is also simply about building the right board. Boards are casting a wider net to a broader pool to find the best candidates with the expertise and business acumen needed.

Four Steps Boards Can Take to Find Diverse Candidates

1. Prioritize building and expanding diverse personal networks. Every director knows that when it comes to finding board opportunities, relationships are what matter most, and a director’s personal network is their most trusted candidate pool. Board members should make it a priority to expand and diversify their connections.
2. Set clear expectations with director recruitment firms. Recruiters can bring additional candidates to the fore outside of personal networks. Boards should require recruiters to consider diverse candidates, and make the company’s board diversity goals clear.
3. Don’t let the lack of prior corporate board experience limit the candidate pool. Recruiting diverse executives who have governance experience, board certification credentials, or time served on private or nonprofit boards can make for a great candidate pool. Experience can be more important than title, such as the human capital credentials of a chief human resources officer at a Fortune 100 company compared to the CEO of a midsized firm.
4. Tap new sources for director candidates. Many boards are turning to new sources of help to find the expertise and diversity that they are seeking in a new board member. These include affinity groups, such as the Boule Blacks on Boards, the Latino Corporate Directors Association, 50/50 Women on Boards, Ascend, The Leverage Network, and more. They also include banks, consultants, and professional services firms.

Companies are facing a more polarized and divisive climate this election year. This is creating significant challenges for corporate directors on many fronts, including how they oversee DE&I efforts. Leading boards will stay the course on diversity, even during this charged environment. They will continue to recruit diverse talent to gain broader perspectives and skill sets in the boardroom, which will allow their companies to meet the challenges of the day. 

EY is a NACD partner, providing directors with critical and timely information, and perspectives. EY is a financial supporter of the NACD.

The views reflected in this article are the views of the author and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.