S&P 500 companies are continuing to make strides in board diversity. Through May 2021, S&P 500 boards designated 456 new independent directors, the largest addition since 2004. Seventy-nine percent of that number are minority men and women, according to a new report by Spencer Stuart, an executive search and leadership advisory firm.
In addition to this, 30% of all S&P 500 directors are women, showcasing continuous improvement since last year's study.
"Boards focused on increasing diversity in 2021, adding more women and directors from historically underrepresented ethnic and racial groups," says Julie Hembrock Daum, the lead for Spencer Stuart's North American Board Practice. "The focus on this is likely to continue, but boards can't always increase in size to bring on needed skills or backgrounds. The most effective boards will embrace a refreshment mindset to ensure they have the right expertise in the boardroom."
Racial and ethnic diversity had some of the most significant increases during this "landmark" year. The number of new independent directors identifying as Black/African American, Asian or Hispanic/Latino more than doubled from 22% to 47%. A decade ago, only 14% of new directors were from underrepresented groups.
With boards of 50% non-white members, Starbucks and Accenture have the most racially diverse boards in the S&P 500.
The 2021 Spencer Stuart U.S. Board Index results show that companies are rising to the challenge of putting diversity on the forefront, including gender, age, race/ethnicity and professional background. In contrast, low boardroom turnover has slowed the process of achieving more diverse board composition.
When analyzing the S&P 500 directors as a whole, new directors only account for 9%, consistent with previous years. Boards may continue to have low turnover rates if they rely on mandatory retirement policies as their main driver for creating board openings.
"Boards with a refreshment mindset will adopt intentional and ongoing processes for evaluating needed expertise and the contributions of directors, reducing reliance on mechanisms such as mandatory retirement or term limits to encourage turnover," Daum told CNBC field producer Harriet Taylor in an email. "This approach also aligns boards with investors, who expect boards to regularly evolve their skill sets based on the forward-looking strategy."
Even though the number of S&P 500 boards with mandatory retirement policies has declined somewhat over the past decade — to 70% today from 73% in 2011 — their retirement ages continue to increase. Over half of boards with age limits have a mandatory retirement age of 75 or older, up from 48% last year and 20% a decade ago.
Despite strides for overall diversity, progress for women, according to the report, is varied. According to this year's Index, women now make up 30% of all directors in the S&P 500, which is up from 28% last year and 16% a decade ago. However, the proportion of women among new independent directors has decreased to 43% from 47% last year.
"Most businesses today recognize that DE&I is integral to their success," Daum said. "Leveraging different perspectives contributes to a more complete understanding of opportunities and issues, fostering better decision-making and competitive advantage."