Corporate Governance

Gender Diversity on the Board of Directors: An International Comparison and the Need for Access

By J Robert Brown Jr.

As we discuss the board of directors and independence, its never a bad idea to revisit the issue of diversity.  In this post, we look at things from a global perspective.

GovernanceMetrics has produced a fascinating report on gender diversity, Women on Boards, A Statistical Review by Country, Supersector and Sector, GovernanceMetrics International®, March 11, 2010.  The firm follows more than 4200 companies worldwise.  How many women are there in total?  9.4%, up from 9.2% in March 2009. 

The study uses a number of metrics.  One of the tables ranks countries based upon the percentage of companies that have at least one director on the board. The other looks at the number of women as a percentage of total directors. 

With respect to the number of companies with at least one woman on the board, the percentage in the US is 68.93%.  In other words, 31% of the 1754 companies followed by GovernanceMetrics have no women on the board.  That's high enough, however, to be ranked 14th.

The higher ranked top countries?  Finland (96.3%); Sweden (93.88%); Israel (93.75%); Norway (91.30%); South Africa (90.70%); Philippines (83.33%); Thailand (81.82%); Denmark (80.77%); Ireland (75.00%); Canada (72.79%); Spain (71.74%); Egypt (71.43%); France (68.93%). 

How about some of the low performers?  The UK can only muster about half (51.11%).  Japan comes in at a dismal 9.41%.  Others include South Korea (13.58%), Russia (33.33%), Italy (35.71%), and Australia (43.50%). 

As for the percentage of total directors?  The US comes in at 12.21%, or 10th.  This is behind Norway (34.25%), Finland (23.41%), Swedan (23.89%), Phillipines (19.05%), South Africa (15.53%), Israel (14.13%), Denmark (14.40%),  Netherlands (13.70%), and Canada (12.49%).   As for the bottom of the list?  South Korea (1.53%); Japan (0.89%); and Morocco (0.00% but only three companies).  In twomen represent only 8.46% of the total number of directors.

How can this be anything but a form of market failure?  Is it really the case that the pool of qualified women is so small that only 9% of directors are women?  In effect the nominating process is controlled by the board itself.  Directors nominate a slate and usually run unopposed.  As a result, the fault rests with this process.  While legal reforms such as those in Norway (that now require boards of large companies to have at least 40% of both genders) can redress the imbalance, a more market oriented approach is to take some of the authority away from incumbents.  One way to do that is through the increased election of directors nominated not by the board but by shareholders.  In the United States, the most immediate way to advance that task is by providing shareholders with access to the company's proxy statement for their nominees. 

Full post as published by The Race to the Bottom on June 08, 2010 (boomark / email).