Going Where the Talent Is
Key findings
- Although 41.2% of the constituents of the MSCI ACWI Index had at least 30% female directors as of October 2023, only about a third of those have been able to sustain this level of gender diversity.
- Companies with sustained board gender diversity were also more likely to have women in top executive roles. For U.S.-based companies, it also appeared to be correlated with slightly greater racial and ethnic diversity among boards.
- Diversity at all levels can mean more creativity and better problem solving. And tapping into talent across the entire potential pool is crucial in a dynamic environment with stiff competition for the right skills.
As companies face new challenges in a world that's changing at a dizzying pace, having the right mix of skills, experience and perspectives at the top could make the difference between getting ahead and falling behind. In the race for talent, companies able to tap the full pool to staff their boards and executive suites and develop a diverse pipeline of future leaders may have an edge.[1] In our analysis of diversity across boards, c-suites and executive teams, "diverse leadership" has begun to emerge.
Benefits of sustained gender diversity
MSCI has long tracked the progress of female representation in the boardroom. As of October 2023, women held more than a quarter of all board seats among large- and mid-cap companies in developed and emerging markets (constituents of the MSCI ACWI Index). But these directorships were not evenly distributed among companies. Although 41.2% of these firms had at least 30% women directors, others had few or none. And only about a third of the "30% club" of companies had managed to sustain that critical mass for at least three consecutive years as of February 2024.[2]
Companies with sustained gender diversity at the board level also stood out for other reasons. They were more than twice as likely to have a female board chair or chief executive officer (CEO) than other firms, and slightly more likely to have a female chief financial officer (CFO). This pattern held true across both developed and emerging markets. While only 4.1% of the constituents of the MSCI Emerging Markets Index had sustained board gender diversity as of February 2024, the correlation between board and executive diversity was more pronounced for this universe.
Data concerning the makeup of companies' executive management teams is not as widely available as board data. Still, looking at the information disclosed by the constituents of the MSCI ACWI Index, companies with sustained board gender diversity were again about twice as likely to report at least 30% female executive managers.
Female representation across different seniority levels
This chart includes 2,836 constituents of the MSCI ACWI Index as of Feb. 16, 2024. A female director was considered as having served for at least a three-year tenure if she has been a director since at least Feb. 15, 2021. Only current directors were accounted for. For this analysis, directors include members of the board of directors and the supervisory board, as applicable. As this assessment was aimed at identifying the number of women chairs, CEOs and CFOs, we only accounted for chairs, CEOs and CFOs identified as women according to the issuers' disclosure. As a result, the remaining chairs, CEOs and CFOs include both male chairs, CEOs and CFOs as well as chairs, CEOs and CFOs whose gender have not been disclosed or where information concerning their gender was not available. To assess the percentage of companies with at least 30% women executive managers we only considered those that have disclosed data concerning the makeup of their executive management teams. Source: MSCI ESG Research
Racial and ethnic insights
We also looked at the percentage of racial and ethnic minority directors. As this data is less widely reported than gender diversity, especially outside the U.S., we limited this analysis to U.S.-based companies and can therefore not draw any global conclusions.[3] While a significant percentage of companies even within the U.S. did not disclose the racial and ethnic makeup of their boards, among companies that reported data, those with sustained board gender diversity were also slightly more likely to have greater racial or ethnic diversity at the board level.
Racial and ethnic minority representation at board level among U.S.-based companies
This chart shows 606 U.S.-based constituents of the MSCI ACWI Index by the percentage of racial and ethnic minority directors as defined under the MSCI U.S. Racial and Ethnic data set, as of February 2024. For this analysis, only directors' data mapped to the following demographic groups were accounted for: Board diversity - Asian, Board diversity - Black or African American, Board diversity - Hispanic or Latino, Board diversity - Native Hawaiian or Pacific Islander and Board diversity - Underrepresented racial or ethnic demographic groups. As a result, some racial and ethnic minority directors may not have been accounted for if data concerning them was grouped with data concerning other dimensions of diversity and mapped to other demographic groups. U.S.-based includes both companies with the U.S. as their home market and/or domicile. The data is calculated as a percentage of the overall number of companies that have disclosed racial and ethnic data mapped to one or more workforce groups (i.e., board of directors, executive officers, leadership and all employees) under the MSCI U.S. Racial and Ethnic data set, for 2022 or 2023. A female director was considered as having served for at least a three-year tenure if she has been a director since at least Feb. 15, 2021. Only current directors were accounted for. For this analysis, directors include members of the board of directors and the supervisory board, as applicable. Source: MSCI ESG Research
Impact on talent pipeline
Although the data does not tell us whether there is any causal relationship underpinning these correlations, the group of companies that were able to reach and retain a critical mass of female directors had more diversity of representation across different seniority levels, which may indicate that companies' ability to retain female talent at the board level can have a positive impact on their pipeline of diverse leaders.
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