Women Get Less Support Than Men For Key Board Roles

Women now make up 33% of directors serving on the boards of S&P 500 companies—almost double the level seen a decade ago. The increase in women’s representation on boards is substantial and has been hard fought for.

Institutional investors tend to see diversity as a corporate governance imperative and a source of competitive advantage. For example, Vanguard states that its funds “look for boards to be ‘fit for purpose’ by reflecting sufficient diversity of skills, experience, perspective, and personal characteristics (such as gender, age, race, and ethnicity) resulting in cognitive diversity that enables effective, independent oversight on behalf of all shareholders.” Similarly, BlackRock sees it as “a means to promoting diversity of thought and avoiding ‘group think’ in the board’s advising of and overseeing management.”

These views have become mainstream in modern investing. But some nuances are emerging as investors apply them to proxy-voting decisions—specifically, how to vote in a way that preserves gender balance on boards while also ensuring accountability.

We examined proxy-voting results for S&P 100 companies in the 2023 proxy year (that is, the year to June 30) to illustrate the challenge.

In Big Companies, One Third of Director Elections Involve Women

Board composition in this index of 100 US large-cap companies broadly reflects the marketwide trend. One third of the 1,128 director election resolutions in the last proxy year were to elect or reelect women to the board.

Although the average large-cap company board has around 11 members, investors often focus on four key board roles when voting: the lead director (or the board chair, when this individual is not also the CEO), and the chairs of the audit, compensation, and nominating and governance committees.

It is common for investors to vote against the holders of these key board roles as a means of assigning responsibility for perceived corporate governance shortcomings. Shareholders tend to vote against the chair and members of the most relevant board committee, then vote against the lead director as an escalation if their concerns remain unaddressed.

Women Still Underrepresented as Lead Directors

It is interesting to note that women remain underrepresented among the lead director population at the largest US companies, compared with all other board roles. Over 75% of these lead director roles (or equivalent) are held by men.

The trends in shareholder support for these directors are interesting, though. The chart below shows adjusted shareholder support for the three groups of directors, which excludes votes by company insiders.

Looking at all director election votes, women, with 97.6% median adjusted support, appear to have slightly higher support than men (96.9%). That 1 percentage point is a meaningful difference, given that support for nine tenths of these director election resolutions exceeds 88%.

For Key Board Roles, Women Get Less Support Than Men

However, this pattern reverses if we only look at key board roles. Average support for directors in key board roles is lower, as these positions are often targets for investor dissatisfaction over various risk-management issues.

Ann Mather at Alphabet, Edith Cooper at Amazon, Charlotte Guyman at Berkshire Hathaway, Safra Catz at Oracle, and Robyn Denholm at Tesla are all examples of women in senior board positions who gained less than 80% support from independent shareholders in the 2023 proxy year. Several shareholders attributed their votes against these directors to concerns over independence, long tenure, and oversight of management compensation.

Overall, for these key board roles, median adjusted support is slightly higher for men (95.8%) than for women (95.3%). The gap is considerably wider for lead directors—among these, median adjusted support for men stood at 95.4% compared with 93.8% for women.

This raises an apparent conflict for shareholders seeking to bolster women’s representation on boards to avoid groupthink while also demanding accountability for the board’s performance.

Unintended Consequences

Paul Lee, head of stewardship and sustainable investment strategy at Redington, observes, “Investors need to be conscious of, and careful about, potential unintended outcomes of their sometimes mechanical approaches to voting. Looking at votes over the last couple of years, we have the impression that there may have been an unfortunate outcome of investors’ targeting of nomination and remuneration committee chairs, in that women seem to have on some occasions faced disproportionate votes ‘Against.’ ”

Lee continues, “It’s very interesting to see that play out in terms of votes on lead independent directors in the US, too. That can’t be what investors intend, and there may be a need for them to recalibrate their approaches so as to avoid unhelpful outcomes in terms of votes that appear sexist.”

All this shows that, for investors, there’s a balance to be struck between advocating for cognitive and experiential diversity and boards, and demanding accountability from responsible directors. Furthermore, with the ongoing rollout of greater proxy-voting choice options, it’s one more thing to consider for investors who consider gender equality a priority.