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Chief Executive Officer & Board of Directors

Trends in board composition over the past five years

10/7/2014 Bonnie W. Gwin
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Trends in board composition over the past five years 

Five years ago, Heidrick & Struggles initiated the Board Monitor, designed to capture key characteristics of newly elected independent directors of Fortune 500 companies, track that data from quarter to quarter and year to year, and provide a springboard for discussion of board composition, diversity, and governance. Here is what that data has to tell us about trends in director appointments over the past half-decade.

The five years since the inception of the Heidrick & Struggles Board Monitor have seen a series of events that reverberated in boardrooms around the world: a great recession, more stringent regulation, and greater accountability for directors. At the same time, the push for diversity grew stronger than ever. Organizations dedicated to diversity launched joint initiatives with corporations to address the issue; in the US, SEC regulations called for more transparency about diversity and the selection of directors; in the European Union quotas gained ground. Meanwhile, the understanding of board diversity expanded to include not just gender and ethnicity but skill sets, cultural background, and diversity of thought – and the business value they could produce.

Analysis of board appointments during the period suggests a complex interplay between aversion to risk, likely heightened by economic turbulence, and an as-yet incomplete commitment to diversity. From the standpoint of gender and ethnicity, some hopeful signs appeared. The percentage of women among newly appointed directors climbed steadily each year from 2009 through 2013. The percentage of African-Americans among new appointees in 2013 was nearly double the figure for 2009. On the other hand, those percentage increases occurred on a very small base. Further, sitting and former CEOs and sitting and former CFOs together claimed almost two-thirds of new appointments throughout the five-year period. While that preponderance of CEO and CFO appointments inadvertently limited demographic diversity, the more important point is that it suggests a reluctance to embrace candidates who do not fit the CEO / CFO mold – candidates who could potentially make equally valuable contributions to board deliberations.