One Woman Is Not Enough

Every S&P 500 firm now has at least one female board director. But experts say that alone doesn’t mean boards are embracing diversity.

It’s certainly a notable milestone. The online car-auction company Copart added a woman to its board last week, marking the first time that every firm in the S&P 500 has at least one female board director.

The next step, experts say, is to make sure boards keep working on diversifying. One woman on the board is a good start, and two women would be better. But when it comes to reaping the full benefits of diversity, experts say boards should look a lot more balanced between men and women than they do now. “What makes boards powerful is when there is enough diversity that diverse labels go away and everyone is just looked at as a director,” says Jane Stevenson, global leader for CEO Succession at Korn Ferry and vice chairman of the firm’s Board & CEO Services practice. 

In 2000, more than 80% of the S&P 500 firms at the time had at least one woman on the board. It took nearly a generation to get the rest of the way. Across all the firms, women now hold more than one-quarter of board seats.

Having at least three diverse voices—roughly 20% to 30% of a firm’s directors—is key to realizing the business benefits of diversity, according to a recent series of interviews of veteran board directors by Stevenson and her colleague Julie Norris. In practice, that usually means three or more female directors. “Once that threshold is reached, it’s no longer an oddity, and instead of labels, diversity is part of the norm,” says Stevenson. Put another way, a lone female director is viewed more as the woman on the board instead of simply as a board director. 

Other studies show that firms with different voices on the board perform better. The stock index firm MSCI, for instance, found in a survey last year that organizations with at least three women on the board generated consistently higher returns on equity than firms with less female board representation. 

The pressure from consumers, employees, investors, and regulators for organizations to diversify their boards and leadership continues to increase. Experts suggest boards should consider altering how and where they look for director candidates. For instance, some firms should drop the insistence that a director has experience as a CEO.

At the same time, boards could consider coaching to ensure all its members understand the benefits—and business needs—of diversity. The trend of shrinking board size in recent years, combined with the reluctance of tenured directors to leave, means organizations may also need to employ tactics that make room for new directors on the board.

Joseph Griesedieck, a vice chairman and managing director of Korn Ferry’s Board and CEO Services practice, says having one woman director isn’t enough to achieve the financial and strategic benefits of diversity. Organizations needs multiple diverse directors to change the conversation in the room and bring a higher dimension to board discussions, he says.