Corporates Inch Towards Gender Equity on Boards

On this International Women’s Day, data providers and investors take stock of diversity progress at the executive-level.  

An array of new reports has highlighted an increase in gender diversity on corporate boards, but also warn that global progress towards parity remained too slow, with sizeable disparities between countries.  

Progress towards gender equality started from a low base, and more needs to be done to accelerate the pace of progress. 

“Things are slowly moving in the right direction,” Megan Ie, Senior Analyst at GIB Asset Management, told ESG Investor. “We’re seeing an increase in the number of women on boards in our portfolio companies, which is in line with the global trend towards better female representation.” 

A new report published by data provider Moody’s Ratings suggested that women currently account for an average 29% of investment-grade companies’ board seats, representing merely one percentage point increase since last year. 

“This is our first year tracking progress at the global level and the increase is not significant,” said Ana Rayes, VP-Senior Analyst at Moody’s Ratings. 

Research and data provider MSCI’s latest ‘Women on Boards’ report highlighted that woman held over 25% of board seats at global companies listed on the MSCI ACWI index as of October 2023, but that the rate of growth had slowed to 1.3%, compared to 1.9% in 2022.  

MSCI projected that, at this pace, 50:50 gender representation on corporate boards would only be reached by 2040. 

Across the board 

In a recent article, Jackie Cook, Director of Stewardship at research and data provider Morningstar Sustainalytics, outlined her findings using data from Morningstar covering C-suite executive pay across S&P 500-listed companies.  

She found that female-named executive officers (NEOs) earned on average 85% of what their male counterparts did in 2022.  

This pay ratio was largely down to a gendered division of labour, Cook explained, with women underrepresented in the highest-paying corporate executive titles. For example, women held 64% of chief human resources officer titles, but this role was the lowest paid among the NEOs of S&P 500 companies. 

“Progress [towards gender equity on boards] has been fairly linear – in other words, it doesn’t seem to be accelerating as more women enter the C-suite,” Cook told ESG Investor. “At this pace, gender equality will be decades away.” 

A separate report published by ESG data and investment specialist Impact Cubed found that average gender diversity in management had only increased by 7.8% between 2014 to 2023 – less than 1% per year. 

Globally, women in the paid workforce continue to earn 20% less than men on average. The projected financing gap needed to achieve global gender equality is estimated at US$360 billion. Yet closing gender gaps could boost GDP per capita by 20% globally. 

Skewed results 

Research on the subject has also shown that progress on gender diversity varies across regions.  

The Moody’s report, for instance, noted that gender equality progress on boards was most noticeable in North America – where the proportion of women rose from 19% in 2019 to 30% in 2024 – and Europe, where it increased from 29% to 35%. In comparison, women accounted for less than 20% of board seats in Latin America, the Middle East, Africa, and Asia-Pacific. 

Impact Cubed’s report also noted high disparity between countries. Assessed companies in Portugal and Australia emerged as frontrunners, demonstrating a 16.4% and 14.1% increase in women holding senior management roles over the ten-year period included in the analysis. In comparison, Japan logged just a 5.6% increase. 

“There are also differences at the sector level, with some sectors having greater women representation at board level than others,” said Christina Milhomem, Vice President at MSCI ESG Research. 

The MSCI report showed that the communications sector had the most significant pay disparity, with male CEOs earning US$9.9 million more than their female counterparts on average. 

Investor action 

Meanwhile, gender diversity continues to feature in investors’ engagement and voting priorities.  

Last month, asset manager Allianz Global Investors confirmed plans to bolster voting policies on gender diversity, raising its board gender diversity threshold for companies in the UK, Italy and France to 40%. The firm also expects all its Asia-listed investee companies to have at least one female board member.   

Last year, Japan’s Government Pension Investment Fund allocated US$3.7 billion to track the Morningstar Japan ex-REIT Gender Diversity Tilt index, which targets Japan-based companies exhibiting strong gender diversity policy and practices. 

Launched in 2022, asset manager Ninety One’s Emerging Markets Sustainable Equity strategy has seen a “material improvement” in board gender diversity, according to Juliana Hansveden, Portfolio Manager for Sustainable Equities at the firm.  

“A company’s board is only one area where we would like to see gender diversity, but it is a good starting point for our holdings and is currently where we are focusing our engagements,” she said, noting that Ninety One would like all its investee companies to have a minimum 30% women on their boards. 

At the end of 2022, the fund’s holding companies had 15% of women on their boards on average – which grew to 20% the following year. One of Ninety One’s holdings is Brazilian neobank Nubank, which in 2020 had 36.8% female managers, and 45% in 2022. Nubank is now targeting 50% by 2025.  

“Over time, when these metrics have improved, we will discuss other aspects of diversity as well as inclusion, which ultimately is the most important factor,” said Hansveden. “Do women feel included in the organisation in terms of career opportunities, decision-making, and so on.” 

At GIB Asset Management, portfolio companies recognise the potential benefits of board diversity but are hesitant to increase diversity unless candidates prove they can add value to the board, Ie explained. 

“Understanding the linkage between the merits of a balanced board and the positive performance of businesses is vital to further alleviate inherent structural barriers to gender equality,” she added. 

The practical information hub for asset owners looking to invest successfully and sustainably for the long term. As best practice evolves, we will share the news, insights and data to guide asset owners on their individual journey to ESG integration.

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