Women Representation on Boards Unlikely to See Much Change in 2015

Stay current on changes and developments in corporate law with a wide variety of resources and tools.

By Yin Wilczek

Feb. 25 — Despite the recent calls by shareholders and others for more women corporate directors, the outlook—at least in the near future—isn't too hopeful, an attorney said Feb. 24.

Only about 18 percent of directors in the S&P 500 are women, a figure that has remained relatively unchanged over the past five years, said Jill Webb, senior counsel at McGuireWoods LLP, Richmond, Va. She added that the statistic is unlikely to “move much” this year.

Webb, speaking at a compliance webcast sponsored by her firm, also said the real reason for the under-representation is that companies prefer directors who have prior experience as chief executive officers or chief financial officers. As such, the pool of women director candidates is “very small,” she said.

At the same webcast, Courtney Mitchell, a Dallas-based associate at McGuireWoods, offered several “takeaways” from the Securities and Exchange Commission's recent actions against compliance officers.

SEC Chairman 

SEC Chairman Mary Jo White in September 2014 highlighted the lack of diversity on boards, calling on both companies and shareholders to work together to increase women's participation in boardrooms.

Shareholder proponents are trying to do their part, submitting since 2008 about 100 resolutions on board diversity. More than half of those proposals were submitted in 2013 and 2014, according to McGuireWoods webcast materials.

The few U.S. companies that have reached board gender parity—i.e., half of their board members are women—include Macy's Inc., Avon Products Inc. and Xerox Corp.

Meanwhile, a new Ernst & Young LLP report found that the percentage of board seats held by women increased 5 percent since 2006, but only increased by 1 percent a year since 2012. The E&Y report—issued Feb. 16—also found that only about 15 percent of S&P 1500 companies increased the number of their female directors since 2013.

Despite the low numbers, the U.S. doesn't compare too badly with the rest of the world. According to 2013 statistics provided by McGuireWoods, while the U.S.'s 18 percent lags behind Norway (36.1 percent), Sweden (27 percent) and Finland (26.8 percent), it is on par with France (18.3 percent), Denmark (17.2 percent) and the Netherlands (17 percent).

Webb noted that it is unlikely that the U.S. will join the 20 or so other countries that have adopted quotas or targets to increase female board representation. The small pool of candidates is a major impediment, she said.

Small Pool 

The SEC is demanding more and more from boards, and “it doesn't make sense to require that increased level of responsibility and service and yet have the same 30 to 50 women serving on multiple boards, which is really what we run the risk of” if the U.S. moves to targets and quotas, Webb said.

According to the E&Y report, women on public boards are 9 percent more likely than men to serve on multiple boards.

However, the outlook over the longer term may be more optimistic. In September, an Institutional Shareholder Services Inc. report found that the proportion of women board nominees for large U.S. companies reached a record high in 2014. 

The ISS report found that almost 30 percent of new board nominees at S&P 500 companies were women, compared to 15 percent in 2008. It also found that women represented 22 percent of new board nominees at Russell 3000 companies, compared to 11 percent in 2008.

The ISS report further suggested that if the growth continues at a one-percentage-point-per-year pace, the percentage of women directors should reach 25 percent before the end of the decade.

Separately, almost 40 percent of students enrolled in U.S. MBA programs are women, according to McGuireWoods materials.

Enforcement Director's Speech 

In the discussion on compliance officer liability, Mitchell cited a May 2014 speech by SEC Enforcement Director Andrew Ceresney in which the official said the SEC will initiate enforcement actions against compliance personnel who:

• actively participate in misconduct;

• help in misleading regulators; or

• are clearly tasked with implementing compliance programs or policies and who “wholly failed” to perform those responsibilities.


Mitchell warned that what constitutes “wholly failed” will be determined “from the SEC's perspective.”

The attorney also highlighted several cases filed by the SEC against a chief compliance officer. He noted that in some of the cases—including In re Delaney (Admin. Proc. File No. 34-72185) and In re Meade—the agency acted against both the CCO and the chief executive officer. The agency alleged that the CEO failed to supervise the CCO and other senior executives who caused the securities law violations.

Practical Steps 

Mitchell noted that Ceresney's speech underscores the need for vigilance and diligence on the part of compliance officers, for what remains an “evolving area.” He offered several practical steps that compliance officers can take to fulfill their responsibilities:

• be very familiar with your firm's policies and procedures and any other compliance obligations;

• diligently perform the tasks that the policies and procedures say you will do;

• perform and document periodic reviews—which should be undertaken at least annually—to assess your firm's policies and procedures;

• document exceptions; and

• document actions taken in response to red flags.


As to supervisory responsibility for compliance functions, Mitchell suggested that supervisors:

• take their roles seriously;

• proactively perform their duties as outlined in the firm's compliance policies and procedures; and

• proactively follow up on red flags that may indicate underlying problems.


To contact the reporter on this story: Yin Wilczek in Washington at ywilczek@bna.com

To contact the editor responsible for this story: Kristyn Hyland at khyland@bna.com

The E&Y report is available at http://www.ey.com/Publication/vwLUAssets/EY_-_Women_on_US_boards:_what_are_we_seeing/$FILE/EY-women-on-us-boards-what-are-we-seeing.pdf.


Request Corporate on Bloomberg Law