By: Elizabeth Olson
Banking and capital markets often viewed as dominated by men, achieved high scores in a newly released survey measuring the diversity in their director ranks.
In 2016, women made up 26 percent of the boards in the banking and capital markets industry, which tied with the retail industry, according to a survey conducted by PricewaterhouseCoopers. The average rate of women on boards of companies in the Standard & Poor’s 500-stock index was 21 percent.
In addition, the 21 companies that the survey defined as its banking and capital markets sector have shored up their position by adding more women to their boards. About 13 percent of new directors in 2016 were women.
The entertainment and media industry also scored well, with 22 percent women directors.
Despite a negative spotlight on the lack of women in moviemaking, the 17 entertainment and media companies that were included in the survey increased the diversity of their boards last year: Two-thirds of their new directors were women.
Even so, there were some sour findings in the survey, which for the first time looked at the board demographics of companies in nine industries. The insurance industry, for example, scored poorly, with women making up only 21 percent of its directors and only 7 percent of its new directors last year, the lowest percentage of any of the industries examined in the report.
“Companies in every industry are feeling investor pressure to refresh their boards, and many are focusing on diversity and adding more women directors,” said Paula Loop, who heads PricewaterhouseCoopers’s governance insights center, which was set up several years ago to review corporate governance issues and financial accounting standards.
However, she noted that gender diversity was only one indicator of the efforts boards were making to include people with varied backgrounds and skills. “Diversity is more than a gender issue — it’s about race, ethnicity, skills, experience, age and even geography, in addition to diversity of thought and perspective,” she said.
The survey looked at two measures that companies can use to accelerate board change: mandatory retirement age and term limits for directors. For example, less than two-thirds of the banking and capital markets companies surveyed, had a mandatory retirement age for directors, a situation that leads to many directors serving well into their 70s. By contrast, 73 percent of S. &P. 500 companies have set such an age limit, according to PricewaterhouseCoopers.
The retail industry had the lowest average director age, at 60. And 91 percent of the retail industry companies impose a mandatory retirement age.
The lack of term limits left the technology industry with one of the highest average tenures, at 10 years. Banking and capital markets edged up, too, with average director tenure of eight years, which is the S. &P. 500 company average.
Only about 4 percent of the S. &P. 500 companies impose term limits. No banking, insurance or technology companies included in the study had adopted term limits. General Electric is among the companies that do have a policy, capping board service at 15 years.
Traditional qualifications for directors such as financial and operational skills and industry experience are fading as prerequisites for a seat in the boardroom, Ms. Loop said. Technology skills are becoming increasingly important in qualifying for the position, she added, as well as international experience and cyber security skills.
Even so, she noted, factors highlighted in the survey such as long tenure and the absence of a mandatory retirement age leave the pace of change slow and “the situation gloomy for diversifying boards.”