Small caps lag in adding women to boards

US small-cap companies are lagging their larger peers in adding female directors to boards, according to research by the National Association of Corporate Directors (NACD). 

Between 2017 and 2019, companies with a market cap between $300 mn and $2 bn saw the percentage of women on their board rise from 13 percent to 17 percent, finds the research, which was carried out in partnership with Main Data Group.

Over the same time period, the Russell 3000 index – a benchmark for the whole US stock market – saw the percentage of female directors on boards climb from 15 percent to 19 percent. 

‘Most of this growth is explained by an increasing number of women serving on boards of mid and large-cap organizations rather than small or mega-caps, as mega-cap companies already tend to have high percentages of women while small-cap companies have been slow to embrace this trend,’ notes NACD in a press release. 

In recent years, companies have come under increasing pressure from asset managers and proxy advisers over the number of women on boards. One of the most high-profile examples is the Fearless Girl campaign by State Street Global Advisors (SSGA).

The campaign, launched in 2017, targets companies with all-male boards. In September this year, SSGA said 43 percent of the 1,350 companies targeted had either added a female board member or committed to doing so. 

‘Gender diversity has been an area of focus for us, and we’ve seen a lot of success there,’ said Philip Vernardis, vice president of the asset stewardship team at SSGA, in an interview with IR Magazine earlier this year. 

The research on board diversity appears in the 2019–2020 NACD Public Company Governance Survey, which polled more than 500 board members. Among other findings, the study reports that four out of five boards now ‘engage with ESG issues in some meaningful way’.

‘Most focus on ensuring linkages to strategy and risk,’ notes NACD in the press statement. ‘Discussions with investors about ESG often center on elements of the S (social issues), with an emphasis on human capital (65 percent) and diversity (74 percent).’