Diversity through Turnover: How to Overcome the Glacial Pace toward Board Diversity?

Based on a comprehensive database of corporate board directors, this study provides an overview of recent developments in the gender diversity of US corporate boards. Prior to 2009, women made up about 8% of the directors of US corporate boards. As of 2019, that proportion has since risen to 18% among public firms, while private firms have not witnessed notable improvement. This study highlights the general lack of board turnover—that is, board inertia resulting in incumbents enjoying long tenure—as a key factor in the slow adjustment. Proxy contests resulting from shareholder activism increase the odds that the boards will gain female directors by 32%, despite activist directors themselves being no more gender-diverse compared to new directors added in the absence of contests. This is because firms targeted by proxy contests double board turnover rates, allowing them to tap into a fresh pool of director candidates which is significantly more diverse than the incumbents.