MSCI: Small Pool of Women on Multiple Boards Risky

MSCI: Small Pool of Women on Multiple Boards Risky

Companies may have come under pressure to boost the number of women on their boards but many have relied on a narrow pool of candidates. This raises concerns that some board members may be stretched too thin.

Twenty-two percent of female directors of companies in the flagship MSCI ACWI global equity index serve on three or more boards, versus 12 percent of men, according to a report by index provider MSCI. 

«This finding may imply that despite the broad availability of educated and experienced female professionals, some companies have continued to rely on a limited pool of candidates,» the report said. 

Tough Stance

Big investment firms including BlackRock, Vanguard and Legal & General Investment Management have taken an increasingly tough stance on «overboarding», a situation where a director serves multiple boards and may not be able to fulfill each role fairly. These firms are introducing policies to vote against individual directors who serve on too many boards.

In recent years, companies have faced pressure to increase the proportion of women on their boards, with some countries slating minimum quotas. Twenty percent of directors of the more than 3,000 companies in the MSCI ACWI in 2019 were women, up from 17.9 percent last year and 17.3 percent in 2017.

Net Should Be Cast Wide

«When you put people forward for board seats . . . quite often companies are looking for people with prior experience. It becomes a bit of a Catch-22 situation,» said Ann Cairns, who was quoted in «Financial Times» (behind paywall). 

«It’s not that there aren’t women available to be on boards. It’s that the net isn’t being cast wide enough,» added Cairns, co-chair of the 30 percent Club, which campaigns to increase female representation in the senior ranks of companies. 

George Dallas, policy director of global investor group the International Corporate Governance Network, said companies need to be mindful of the issue when recruiting directors. «You need to balance the desire to create diversity with creating boards that are overly busy. There is no magic formula,» he said.