REIT Diversity: Work to Do

Our white paper reveals why the real estate sector still struggles to have any diversity on REIT boards.

There isn’t a board that doesn’t know how important diversity has become. Indeed, studies show that, across the spectrum, companies with more diverse boards are more profitable, suffer fewer instances of fraud, and experience fewer shareholder battles. But while the outlook for board diversity is improving, one sector still has some work to do in this category: the Real Estate Investment Trust (REIT) industry.

In a recently completed survey of the top 100 REIT companies, Korn Ferry found that in 2017, women accounted for nearly one in five REIT board members (154 out of 863, or approximately 18%), which lags against indices that encompass large companies across other industries. Companies tracked in the Korn Ferry Market Cap 100 have almost double the percentage of women populating their boards, with 29% of directors being female; that is, there were 69% more women on those boards than on REIT boards.

REIT boards that lack women are “shortchanging the boards, the company, and investors,” says Anthony J. LoPinto, Korn Ferry’s global sector leader of Real Estate, and co-author of the report. “They will be increasingly in the spotlight, too.”

Forty-four of the top 100 REIT companies have at least one female director, 30 have two directors, and two boards have four women directors. Still, 10 boards have no women directors—although that is a significant improvement from the 27 boards that had no female representation on them in both 2015 and 2013.


Some of the industry’s diversity issues can be traced back through its history. The REIT industry is relatively young, born of Eisenhower-era legislation in 1960 and emerging as a potent force during the savings and loan crisis in the late 1980s and early 1990s. Over the past several decades, as real estate has boomed, so have REITs. Over the past 25 years, the total market capitalization of listed US equity REITs jumped from $9 billion to more than $1 trillion today. The real estate sector represents nearly 4% of the equity market capitalization of the S&P 1500, and equity REITs make up about 98% of the equity market capitalization of the sector.

Many REIT boards were formed in the 1990s and look pretty much how they did 25 years ago. They are reflections of the entrepreneurs who initially founded them, composed of people from similar backgrounds and experiences. What’s more, the sector historically has not been viewed as a model of best governance and practice. It is, however, reaching a critical state in its development, outgrowing some of the practices that helped it get where it is today. As the industry matures, issues like CEO and board succession are coming to a head.

“REIT boards are poised for change,” LoPinto says. “As founders consider handing the reins of their organizations to a new generation, more effective board succession and selection processes are likely to follow suit.”

Fortunately, change may be on the horizon. Over just the past two years, there has been a 38% increase in the number of women serving on REIT boards, and the total percentage of women has increased from 12% in 2013 to 18% today. Of the 126 executives who joined REIT boards in the past 18 months, almost 49 are women, nearly half of them first-timers. At this pace, the complexion of REIT boards will change dramatically over the next several years.

But to add more women, REIT boards will need to make that recruitment an important priority, since the supply of top candidates is always tight, for men or women. “Boards should carefully consider whether there are cultural impediments that may be standing in the way of recruiting women directors,” says Julie Norris, senior client partner, Board & CEO Services, for Korn Ferry, and co-author of the report. “The goal should be to become the sort of board that women and other underrepresented groups will want to serve on.”

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