Why aren’t corporate boards diversifying more quickly?
Why aren’t corporate boards diversifying more quickly?
A new report shows there hasn’t been much progress in diversifying corporate boardrooms. An analysis of Fortune 500 companies by Deloitte and the Alliance for Board Diversity found white women have made some gains, but overall the move to diversify board representation remains “painfully slow.”
One challenge is that directors don’t tend to leave their board seats very often. Board members generally stick around for about a decade, said Yo-Jud Cheng, a business professor at the University of Virginia. “I mean, it’s very uncommon for someone to be, you know, pushed off of a board.”
Most companies do have mandatory retirement ages for directors, but the age of mandatory retirement has crept up, often above 75, because the rules that govern the board are usually enforced by the board.
“It would be tough, I would imagine, for a fellow director to vote against keeping somebody there if they wanted to continue serving,” Cheng said.
One reason they might want to stay is the average compensation of more than $300,000 a year, according to consulting firm Spencer Stuart. But companies face increasing pressure to be more responsive to cultural change, said Peter Gleason, head of the National Association of Corporate Directors.
“It’s good for a board to refresh itself. It’s good to have a mix of tenure on the board,” Gleason said.
He said boards usually have the option of simply adding seats to increase diversity, but they rarely do.
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