It’s that time of the year. The next few months will see thousands of companies hold their annual meetings of shareholders, who vote for directors to oversee company management on their behalf.
What investors want from boards has not changed. They want to see a good mix of skills, with a combination of tenure and new thinking. Investors count on directors’ demonstrating relevant expertise, diversity of thought, and agility to guide their companies through a changing landscape.
Vanguard, for example, looks “for boards to be fit for purpose by reflecting sufficient breadth of skills, experience, perspective and personal characteristics (such as age, gender, and/or race/ethnicity) resulting in cognitive diversity that enables effective, independent oversight on behalf of all shareholders,” the asset manager writes in its proxy voting policy for U.S. portfolio companies.
So what does the data tell us about progress toward corporate boards that show a desired mix of skills, experience and personal characteristics? Here are five indicators from MSCI’s latest annual report on the state of board composition.
1. Women and men match on skills.
Companies that aim to recruit directors who have the skills to monitor risks and seize new opportunities seem likely to find men at least as qualified as women.
Nearly 37% of male directors at large- and mid-cap listed companies globally had financial expertise based on experience as auditors, accountants or CFOs, compared with nearly 40% of their female counterparts, as of October 2024, while male and female directors had roughly the same levels of expertise in risk management.
Financial and risk management expertise by gender (2024)
Data as of October 2024. Source: MSCI ESG Research.
2. Companies with a critical mass of women on the board have shown a better bottom line.
Just under half (46%) of listed companies globally had a critical mass of women on their board (defined by industry convention as 30% or more), as of October.
In aggregate over five years ending Sept. 30, 2024, these companies with a critical mass of female directors achieved a cumulative return nearly 19% higher versus those without.
3. Female directors are busy…
Among listed companies globally, nearly one in four women directors served on two boards as of October 2024, compared with fewer than one in five of their male counterparts. Overall, three quarters of male directors served on one board, compared with roughly two-thirds (63%) of female directors.
4. … and they have higher turnover than male directors.
Nearly half of the constituents of the listed companies globally had at least 30% female directors. Yet only 13% of these companies retained the same female directors for at least three consecutive years, while also maintaining at least 30% female directors throughout the period. In comparison, 80% of companies had at least 30% of their board seats held by the same male directors for the past three consecutive years.
5. Racial and ethnic representation has ticked up.
In the U.K., where companies are required to disclose ethnic data on boards and executive management, 19.2% of all the board seats of listed companies among the disclosing companies were held by ethnic minority directors. While disclosure remains limited for U.S.-listed companies, more than one-third (35.2%) of companies had a critical mass of racial and ethnic minority directors, up 7.7 percentage points from a year earlier.