In the latest report from MSCI ESG Research, a nuanced picture emerges on the state of gender diversity within corporate boards. Despite a marginal uptick in the percentage of women directors, concerns loom over the slowing pace of change, according to the annual Women on Boards and Beyond report.
The data indicates a modest increase, with women now occupying over 25% of board seats in major global companies, reflecting a 1.3% growth from the previous year. While this signifies progress, the research, released a week ahead of International Womens Day on 8 March, underscores a notable deceleration in the momentum of change, as compared to the 1.9% growth observed in 2022.
As of 2023, women held 25.8% of board seats in large and mid-cap global enterprises. Notably, by October of the same year, 41.2% of companies listed on the MSCI ACWI Index achieved a milestone, boasting at least 30% of board seats held by women. This achievement aligns with the expectations of investors, regulators, and stakeholders who have long advocated for increased gender diversity in corporate governance.
For context, the European Union has adopted a target of 40% of non-executive director seats on corporate boards to be held by the underrepresented gender by June 2026. In the EU, financial institutions are required, under the Sustainable Finance Disclosure Regulation (SFDR) to report on the gender diversity and gender pay gap of the boards of their investment holdings as part of the mandatory Principle Adverse Impact (PAI) indicators. The UK’s Financial Conduct Authority is currently consulting on reporting requirements and is considering requiring firms to report diversity not only among members of boards and those in senior leadership positions, but among all employees.
Despite the strides made in the last five years, MSCI’s growth rate analysis reveals a notable slowdown compared to previous years, signalling a potential challenge in sustaining the positive trajectory.
Parity aspirations remain distant
The aspiration for complete gender parity at the board level remains distant, with MSCI researchers Anna Csonka and Christina Milhomem projecting that this equilibrium may not be reached until 2040. This prognosis underscores the persistent hurdles in achieving equal representation at the upper echelons of corporate leadership.
Further disparities are evident in leadership positions, with only 9.1% of board-chair roles and 6.5% of CEO positions occupied by women. While the number of female CEOs has doubled since 2019, women still grapple with significant underrepresentation in these key decision-making roles.
On a positive note, the gender pay gap among CEOs is narrowing, with male and female CEOs receiving comparable total salaries on average. In 2022, global CEOs earned an average of $6.5 million for men and $6.3 million for women. However, significant divergences persist between sectors and countries, with the communications sector showing the most notable pay disparity, where male CEOs earned an average of $9.9 million more than their female counterparts.
Disclosure gap
Turning attention to ethnic and racial diversity, the report highlights a substantial gap in disclosure despite legal requirements. Sporadic reporting hinders a comprehensive understanding of diversity within corporate structures. While gender diversity surpasses ethnic and racial diversity based on available UK and US data, challenges persist in achieving meaningful progress in the latter.
The MSCI report acknowledges the sporadic reporting on ethnic diversity, with only 23 companies from the MSCI ACWI disclosing ethnicity data at the board level under UK listing rules. The majority of reported directors were white, with Asian/Asian-British directors constituting the largest minority at approximately 9%. However, only one company surpassed the 30% threshold for ethnic minority directors.
In the US, transparency remains a challenge, as companies are not mandated to make their diversity data public. Notably, only Nasdaq-listed companies are currently obligated to disclose the racial and ethnic data of their executives.
Gender diversity on boards improved since 2019
