Research and Links of Interest

Gender Diverse Boards Produce Better Results

Numerous independent studies have concluded that companies perform better when women serve on their boards of directors:

Companies in the top-quartile for gender diversity on executive teams were 25% more likely to experience above-average profitability than companies in the fourth quartile (McKinsey & Co. 2020). In addition, gender-diverse leadership contributes to the long-term success of a company. In 2019, a study of 2500 companies showed the percentage of the board that is female contributes 8% to the predicted five-year return on invested capital for the company (FCLTGlobal 2019).

Having three women on the board, rather than just one or none, increases the effectiveness of a corporate board of directors. U.S. companies that began the period from 2011 to 2016 with three or more female directors reported earnings per share that were 45% higher than those companies with no female directors at the beginning of the period. Moreover, for the companies in the study, adding any number of female directors was correlated with higher median increases in earnings per share compared to losing women from the board during the same period (MSCI 2016). Similarly, for profitable firms, a move from no female leaders to 30 percent representation is associated with a 15 percent increase in the net revenue margin (Noland et al. 2016).

Current Representation of Women on Boards

Although progress has been significant over the past decade, gender parity remains a distant goal. Overall, 23.3% of board positions are now held by women globally, compared to 20.4% in 2018. Women now make up 27.3% of all board committee members globally, and 2.1% of all board chairs (Egon Zehnder 2020). Women comprise 30% of S&P 500 boards (Spencer Stuart 2021), 27% of Fortune 500 boards (Heidrick & Struggles 2020), and 22.6% of Russell 3000 boards (2020 Women on Boards 2020).

New director appointments paint a promising picture. Of the seats filled last year on Fortune 500 boards, almost 41% went to women, a doubling of the percentage over the past decade (Heidrick & Struggles 2020). Similarly, women comprise 43% of the incoming class of directors for S&P 500 companies, compared to 47% last year. Among boards’ recruiting priorities, the recruitment of women fell from 3rd place last year to 10th this year. Thus, the overall representation of women on S&P 500 boards remains stubbornly low (Spencer Stuart 2021).

The number of boards with three or more women directors is on the rise. The portion of S&P 1500 companies with three or more women on the board has grown from 20% in 2016 to 44% in 2020 (EY 2020). And in 2019, the number of R3000 companies with no women on their boards decreased by 25% (2020 Women on Boards 2019)

Even with this notable progress, the rate of change is still slow. According to the most recent update from Equilar’s Gender Diversity Index, it will take nearly 40 years for Russell 3000 companies to reach gender parity (Equilar 2019)

Senior Women Lawyers: An Untapped Vein of Board Talent

Senior women lawyers constitute a rich, largely untapped vein of board talent. The share of women executives serving as general counsels at S&P 500 companies nearly doubled in the past decade (12.8% in 2007 to 23.8% in 2017) (Pew 2018). And in 2018, women held the top GC role in 28% of Fortune 500 companies (Russell Reynolds 2018)

Meanwhile, the roles and responsibilities of the chief legal officer have continued to expand. In an ACC survey of over 900 CLOs from around the world, 53% of CLOs indicated that they have a reporting line to their organization’s board of directors. Furthermore, 78% of Fortune 500 CLOs report directly to the CEO (ACC 2021)

Women also hold a growing number of senior positions at law firms. Women comprise 21% of equity partners at AMLAW 200 law firms (NAWL 2020)

 

The Value of Lawyer-Directors

A recent study on the role of lawyer-directors on the boards of financial institutions is illustrative of the value that lawyers can bring to corporate boards. Since 1999, the portion of banks with lawyers on their board has increased from 40% to more than 70%. The study demonstrated that adding a lawyer to the board of a financial institution produced a 5.7% average increase in the bank’s value—a causal rather than an associative link. The study further found that banks with lawyer-directors are more effective at calibrating their tolerance for risk-taking relative to current economic conditions (Guernsey et al. 2020)

Other research outside of the banking industry has shown that companies with lawyer-directors experience a 9.5% increase in firm value over corporations with no lawyers on the board. Lawyer-directors play an essential role in helping companies manage the significant rise in litigation and regulation affecting businesses and changes in CEO compensation (Litov et al. 2014).

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Juliette Pryor

Juliette Pryor is a skilled public and private company c-suite executive with 25+ years of business experience. She has deep experience in the board room of multiple corporations, providing key

Kellye L. Walker

Kellye Walker, Executive Vice President and Chief Legal Officer of Eastman Chemical Company (NYSE: EMN), is a seasoned senior executive with over 25 years of experience helping publicly traded companies

Sarah C. Dodds-Brown

Sarah Dodds-Brown serves as Executive Vice President & Managing Counsel at American Express where she leads the U.S. Business Legal Group – a team of over 75 attorneys located in New