WSJ News Exclusive | Newest Class of Corporate Directors Is the Most Diverse Yet, but Gains Are Uneven

The second study, by executive and board recruiting firm Spencer Stuart, found that a third of new independent board members for S&P 500 companies identifying director demographics were Black, up from 11% the year before, and 7% were Latino, up from 3%. With the new arrivals, a little over three-quarters of S&P 500 board members were white and 70% were men, according to Spencer Stuart. It had released preliminary data earlier this year.

The data mirror the experience of directors and recruiting professionals, who say they are receiving significantly more inquiries from boards seeking to increase diversity in their ranks, as companies face regulatory and shareholder pressure to change their boards.

In the past, “I think we tiptoed around it—we know we should get diversity but [people would say] ‘we want the best candidate’ and all of that,” said

Hope Cochran,

a managing director at Madrona Venture Group in Seattle who sits on the boards of toy-maker

Hasbro Inc.,

HAS 0.72%

database company

MongoDB Inc.

MDB 0.80%

and software maker

New Relic Inc.

“Now it is just an imperative.”

Ms. Cochran also co-leads the board-diversity program OnBoarding Women, which has placed 68 women on corporate boards in the past five years.

New legislative and regulatory initiatives have helped shift corporate behavior. The Securities and Exchange Commission recently approved a Nasdaq listing requirement that companies explain if they fall short of gender and ethnicity diversity targets for their boards.

In California, publicly traded companies based in the state must have at least one female board director or they face financial penalties. This winter, California companies must meet requirements for racial and ethnic minorities or people who identify as gay, lesbian, bisexual or transgender on boards or face fines. The California rules face legal challenges saying they unfairly discriminate against white men.

The Conference Board analysis drew on disclosures in corporate securities filings and other documents for S&P 500, S&P MidCap 400 and Russell 3000 companies during the 2021 proxy season through June 30 this year, without seeking to categorize the race, ethnicity or gender of directors if those details aren’t disclosed by the companies. As a result, the figures could differ from those of other analyses. The study by Spencer Stuart, which sells advisory services to identify and recruit new board members, used proxy statements filed by S&P 500 companies from late May 2020 through mid-May this year.

A variety of independent executive-search groups, such as the Monarchs Collective and Take Your Seat, have sprung up to help diversify boards, establish networks of experienced minority candidates, and work with companies and larger recruiters. Law firm Perkins Coie LLP launched an initiative in June to boost the number of Black directors. These efforts have expanded the universe of people who are tapped for board roles, executives, board members and recruiters say.

“We create our own networks and so the white male club, basically, when they think about board membership, they turn to the people they know,” said

John Replogle,

co-founder of Take Your Seat and former chief executive of Burt’s Bees and Seventh Generation. He said Take Your Seat maintains a roster of more than 1,500 Black candidates.

First-time directors are less likely to be retired and more than twice as likely to be under 50 years old, Spencer Stuart found. About two-thirds of these younger directors are from historically underrepresented racial or ethnic groups.

Ken Denman,

a former technology company CEO who serves on the boards of retailer

Costco Wholesale Corp.

COST 1.11%

, cloud-software company

VMware Inc.

VMW 2.81%

and communications-equipment firm

Motorola Solutions Inc.,

MSI 0.85%

said his goal is to steer companies to new director candidates when they contact him about joining a board.

“Adding diverse candidates—women, people of color, whomever—you really do have to be intentional,” said Mr. Denman, a venture capitalist. “Only more recently folks are starting to call within the [board affinity] groups looking for references.”

The rapid addition of minority directors has been slow to diversify overall board demographics in part because of low turnover. Nearly 40% of S&P 500 companies didn’t change their boards over the past year, and about half of the companies in the S&P MidCap and Russell 3000 indexes didn’t, the Conference Board found.

In addition, some companies add board seats rather than replacing existing directors. Spencer Stuart found that 88 companies in the S&P 500 created new seats to add 114 minority directors, 37 of whom are female.

Longer-term efforts to add women to corporate boards are showing signs of progress, both studies showed. More than a third of S&P 500 boards now have three female directors, and a quarter have four, according to the Conference Board report. Barely one in 10 companies had four female directors in 2016. The share of new board members who are women fell slightly from a year earlier, but at 38% remains well above levels seen five years ago.

It was more common for smaller companies to have few or no female directors: 1.2% of S&P MidCap 400 companies and 4.2% of Russell 3000 companies had no female directors, while 10.6% and 23% had just one, the Conference Board report said. Both groups of companies, however, had more women on their boards than in prior years.

Write to Theo Francis at [email protected] and Emily Glazer at [email protected]