Corporate Boards: Strategies to Address Representation of Women Include Federal Disclosure Requirements
Published: 2015-12-03T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Women make up almost half of the nation's workforce, yet research shows that they continue to hold a lower percentage of corporate board seats compared to men. Research highlights advantages to gender diverse boards, and some countries have taken steps to increase board gender diversity. The SEC requires companies to disclose certain information on board diversity. GAO was asked to review the representation of women on U.S. corporate boards.
This report examines (1) the representation of women on boards of U.S. publicly-traded companies and factors that may affect it and (2) selected stakeholders' views on strategies for increasing representation of women on corporate boards. GAO analyzed a dataset of board directors at companies in the S&P 1500 from 1997 through 2014; and conducted interviews with a nongeneralizable sample of 19 stakeholders including CEOs, board directors, and investors. GAO selected stakeholders to reflect a range of experiences, among various factors. GAO also reviewed existing literature and relevant federal laws and regulations.
GAO is not making recommendations in this report. SEC provided technical comments that were incorporated, as appropriate. The Equal Employment Opportunity Commission had no comments.
section_title: What GAO Found
paragraphs: Representation of women on the boards of U.S. publicly-traded companies has been increasing, but greater gender balance could take many years. In 2014, women comprised about 16 percent of board seats in the S&P 1500, up from 8 percent in 1997. This increase was partly driven by a rise in women's representation among new board directors. However, even if equal proportions of women and men joined boards each year beginning in 2015, GAO estimated that it could take more than four decades for women's representation on boards to be on par with that of men's.
Based on an analysis of interviews with stakeholders, board director data, and relevant literature, GAO identified various factors that may hinder women's increased representation among board directors. These include boards not prioritizing recruiting diverse candidates; few women in the traditional pipeline to board service—with Chief Executive Officer (CEO) or board experience; and low turnover of board seats.
Stakeholders GAO interviewed generally preferred voluntary strategies for increasing gender diversity on corporate boards, yet several large investors and most stakeholders interviewed (15 of 19) supported improving Securities and Exchange Commission (SEC) disclosure requirements on board diversity. SEC currently requires companies to disclose information on board diversity to help investors make investment and voting decisions. As stated in its strategic plan, one of SEC's objectives is to ensure that investors have access to high-quality disclosure materials to inform investment decisions. A group of large public pension fund investors and many stakeholders GAO interviewed questioned the usefulness of information companies provide in response to SEC's board diversity disclosure requirements. Consequently, these investors petitioned SEC to require specific disclosure on board directors' gender, race, and ethnicity. Without this information, some investors may not be fully informed in making decisions. SEC officials said they plan to consider the petition as part of an ongoing effort to review all disclosure requirements.

section_title: Letter
paragraphs: Corporate boards take actions and make decisions that not only affect the  lives of millions of employees and consumers, but also influence the  policies and practices of the global marketplace. In the United States,  women make up almost half of the workforce, but research shows that  they occupy a much lower percentage of board seats at publicly traded  companies compared to men. A growing body of literature has highlighted  the advantages of increased diversity on corporate boards, including  gender diversity, such as including more perspectives leading to better  decision making, better reflecting a company’s employee and customer  base, and having a broader talent pool from which to select candidates.  Investors, corporate governance organizations, Chief Executive Officers  (CEO), board directors, and other stakeholders in this area have also  recognized the importance of increasing the representation of women on  corporate boards. While the U.S. Securities and Exchange Commission  (SEC) requires public companies in the United States to disclose certain  information on board diversity, some countries have started taking steps  designed to directly increase gender diversity in the boardroom, including  mandating quotas.
You asked us to examine gender diversity on corporate boards. This  report describes (1) representation of women on U.S. corporate boards  and factors that affect it and (2) selected stakeholders’ views on various  strategies to increase representation of women on U.S. corporate  boards.
To provide descriptive statistics on women’s representation on boards  and different characteristics of male and female board directors, we  analyzed a dataset from Institutional Shareholder Services, Inc. (ISS) on  board directors at each company in the S&P Composite 1500 from 1997  through 2014, the years for which data were available.Through  interviews with knowledgeable ISS employees and electronic data testing,  we found the data reliable for the purposes used in this report. See  appendix I for more detailed information about our data analyses.
To identify factors affecting the representation of women on corporate  boards and obtain stakeholders’ views on various strategies for  increasing gender diversity on boards as well as SEC’s current disclosure  requirements on board diversity, we conducted semi-structured interviews  using a standard set of questions with 19 individuals. We selected  individuals to reflect a range of experiences and perspectives, including  current or former CEOs and board directors in different industries;  investors such as asset management firms and pension funds; and  individuals to reflect a mix of gender and racial backgrounds. We selected  most of these individuals based on recommendations from corporate  governance associations and researchers or because of their involvement  in board diversity efforts or their participation in related panel discussions  or report contributions. We also interviewed several individuals who have  experience serving on boards with few, if any, women. While the views  of the individuals we interviewed represent a range of perspectives, they  cannot be generalized to the universe of CEOs, board directors, or  investors. See appendix II for a list of the individuals we interviewed. We  identified potential strategies through reviewing relevant literature and  interviewing researchers, organizations, and institutions knowledgeable  about corporate governance and diversity on corporate boards. We  identified them through a literature search and recommendations from  other knowledgeable individuals. Their views represented a wide range of  perspectives but do not represent all views on the topic. See appendix III  for a list of organizations we interviewed.
We also reviewed SEC’s current disclosure requirements on board  diversity. We compared the views we obtained from our interviews as well  as other investors on the usefulness of the information produced by these  requirements to SEC’s strategic objectives for providing investors with  high-quality information, as outlined in its 2014-2018 strategic plan. We  also reviewed relevant federal laws and regulations, and interviewed  officials at the SEC, the Equal Employment Opportunity Commission  (EEOC), and the Department of Commerce.
We conducted this performance audit from October 2014 to December  2015 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
subsections: section_title: Background
subsections: section_title: Responsibilities of Corporate Boards
paragraphs: Generally, a public company’s board of directors is responsible for  managing the business and affairs of the corporation, including  representing a company’s shareholders and protecting their interests.  Corporate boards range in size and according to a 2013 survey of public  companies, the average board size was about nine directors, with larger  companies often having more. Corporate boards are responsible for  overseeing management performance on behalf of shareholders and  selecting and overseeing the company’s CEO, among other duties, and  directors are compensated for their work. The board of directors generally  establishes committees to enhance the effectiveness of its oversight and  focus on matters of particular concern. See figure 1 for common  corporate board committees and their key duties.
section_title: Research on Gender Diversity on Corporate Boards
paragraphs: Research and other literature provide a number of reasons as to why it is  important for corporate boards to be diverse. For instance, research has  shown that the broader range of perspectives represented in diverse  groups require individuals to work harder to come to a consensus, which  can lead to better decisions. Some research has found that gender  diverse boards may have a positive impact on a company’s financial  performance, but other research has not. These mixed results depend, in  part, on differences in how financial performance was defined and what  methodologies were used. Various reports on board diversity also  highlight that diverse boards make good business sense because they  can better reflect the employee and customer base, and they can tap into  the skills of a wider talent pool.
section_title: Federal Disclosure Requirements on Board Diversity
paragraphs: Publicly traded companies are required by the SEC to disclose to their  shareholders certain corporate governance information for shareholder  meetings if action is to be taken with respect to the election of directors.  Companies disclose this information in proxy statements that are filed  with the SEC.The SEC’s mission includes protecting investors, and  disclosure is meant to provide investors with important information about  companies’ financial condition and business practices for making  informed investment and voting decisions. Investors owning shares in a  company generally have the ability to participate in corporate governance  by voting on who should be a member of the board of directors. In  December 2009, the SEC published a rule that requires companies to  disclose certain information on board diversity in proxy statements filed  with the Commission if action is to be taken with respect to the election of  directors, including whether, and if so how, boards consider diversity in  the director nominating process. Also, if boards have a policy for  considering diversity when identifying director nominees, they must  disclose how this policy is implemented and how the board assesses the  effectiveness of its policy.
section_title: Approaches in Other Countries for Addressing Boardroom Diversity
paragraphs: According to various publications on corporate governance or gender  diversity, several countries are implementing measures to address  gender diversity in the boardroom such as:
Quotas. Some countries, such as Germany and Norway, among  several other countries, have government quotas to increase the  percentage of women on boards. For example, Germany  requires that 30 percent of board seats at certain public  companies be allocated for women and Norway requires that 40  percent be allocated for women.
Disclosure policies. Other countries, such as Australia and  Canada, have adopted “comply or explain” disclosure  arrangements. Under such arrangements, if companies choose  not to implement or comply with certain recommendations or  government-suggested approaches related to board diversity— such as establishing a diversity policy—they must disclose why.
Voluntary approaches. The United Kingdom has aimed to  increase the representation of female directors through a  voluntary, target-based approach rather than through the use of  government-mandated interventions. As part of this effort, the  government worked with leading companies, investors, and  search firms to encourage the adoption of a set of  recommendations to increase representation of women on  boards. These recommendations included, for example, that  certain companies achieve a minimum of 25 percent women on  boards by 2015 and publicly disclose the proportion of women on  the company’s board, management, and workforce. In addition,  executive search firms were encouraged to draw up a voluntary  code to address gender diversity and best practices covering  relevant search criteria for board directors. Selected search firms  in the United Kingdom have entered into a voluntary Code of  Conduct to address gender diversity on boards in their search  processes, including trying to ensure that at least 30 percent of  proposed candidates are women.
section_title: Representation of Women on Boards Has Increased to About 16 Percent, but a Number of Factors May Hinder Further Progress
subsections: section_title: Women’s Representation on Boards Has Increased 8 Percentage Points over the Past 17 Years but Greater Gender Balance May Take Time
paragraphs: Based on our analysis, we found that women’s representation on boards  of companies in the S&P 1500 has increased steadily over the past 17  years, from about 8 percent in 1997 to about 16 percent in 2014. As  figure 2 illustrates, part of what is driving this increase is the rise in  women’s representation among new board directors—directors who  joined the board each year.
While the number of female board directors among S&P 1500 companies  has been increasing, particularly in recent years, we estimated that it will  likely take a considerable amount of time to achieve greater gender  balance. When we projected the representation of women on boards into  the future assuming that women join boards in equal proportion to men— a proportion more than twice what it currently is—we estimated it could  take about 10 years from 2014 for women to comprise 30 percent of  board directors and more than 40 years for the representation of women  on boards to match that of men (see fig. 3).  Appendix I contains more  information about this projection.
Even if every future board vacancy were filled by a woman, we estimated  that it would take until 2024 for women to approach parity with men in the  boardroom.
Using 2014 data, we also found that women’s representation on boards  differed by company size and industry (see fig. 4) and that there were  differences in certain characteristics between male and female directors,  such as age and tenure (see fig.5).
section_title: Various Factors May Hinder Increased Representation of Women among Board Directors
paragraphs: Based on our interviews with stakeholders, analysis of ISS board director  data, and our review of relevant literature, we identified various factors  that may hinder increases in women’s representation on corporate  boards: boards not prioritizing diversity in recruitment efforts; lower  representation of women in the traditional pipeline for board positions;  and low turnover of board seats.
subsections: section_title: Not Prioritizing Diversity in Recruitment Efforts
paragraphs: Several stakeholders we interviewed suggested boards not prioritizing  diversity in identifying and selecting directors is a factor affecting gender  diversity on corporate boards.
Specifically, 9 of the 19 stakeholders we interviewed cited board  directors’ tendencies to rely on their personal networks to identify new  board candidates as a factor that contributes to women’s lower  representation. For example, three of the nine stakeholders  specifically noted that men tend to network with other men, and given  that the majority of board directors are men, this may prevent women  from obtaining vacant board seats.
Furthermore, 8 of the 19 stakeholders suggested unconscious bias  may be a factor affecting the selection of women onto boards. Several  stakeholders we interviewed discussed board directors’ desire to  maintain a certain level of comfort in the boardroom. For example,  one stakeholder observed that boards may have a tendency to seek  other directors who look and sound like they do. Another noted that  boards want to ensure new members “fit in” which may lead them to  recruit people they know and can limit gender diversity on boards.
We found some indication that boards’ appointment of women slows  down when they already have one or two women on the board. In  2014, 29 percent of companies in the S&P 500 that had no women on  the board added a woman; 15 percent of companies that had one  woman on the board added a woman; and 6 percent of companies  that had two women on the board added a woman. Small and  medium-sized companies generally followed the same pattern.
Further, three stakeholders we interviewed specifically suggested that  boards may add a “token” woman to appear as though they are  focused on diversity without making diversity a priority.
section_title: Low Representation of Women in the Traditional Pipeline for Board Positions
paragraphs: Eleven of the 19 stakeholders we interviewed highlighted the low  representation of women in the traditional pipeline for board seats—with  either CEO or board experience—as another factor affecting the  representation of women on boards. According to recent reports, current  and former CEOs composed nearly half of new appointments to boards of  Fortune 500 companies in 2014, and 4 percent of CEOs in the S&P  1500 in 2014 were women. One CEO we interviewed said that as long  as boards limit their searches to the pool of female executives in the  traditional pipeline, they are going to have a hard time finding female  candidates.
section_title: Low Turnover of Board Seats Each Year
paragraphs: Another factor that may help explain why progress for women has been  slow and greater gender balance could take time is that boards have only  a small number of vacant seats each year. Based on our analysis, we  found that board turnover has remained relatively consistent since 1998,  with 4 percent of seats in the S&P 1500 filled, on average, by new board  directors each year. In 2014, we found that there were 614 new board  directors out of 14,064 seats among all companies in the S&P 1500.  Seven of the 19 stakeholders we interviewed similarly cited low turnover,  in large part due to the long tenure of most board directors, as a barrier to  increasing women’s representation on boards.
section_title: Stakeholders Provided Mixed Opinions on Potential Strategies, Yet They and Some Large Investors Supported Improving Disclosure Requirements on Board Diversity
subsections: section_title: Stakeholders Provided Mixed Opinions on Various Potential Strategies for Increasing Representation of Women on Corporate Boards
paragraphs: Based on relevant literature and discussions with researchers,  organizations, and institutions knowledgeable about corporate  governance and board diversity, we identified a number of potential  strategies for increasing gender diversity on corporate boards (see table  1). While the stakeholders we interviewed generally agreed on the  importance of diverse boards many noted that there is no one-size-fits- all solution to addressing diversity on boards and highlighted advantages  and disadvantages of various strategies for increasing gender diversity on  corporate boards.
Potential strategies for encouraging or incentivizing boards to prioritize  and address gender diversity as part of their agenda could include:
Requiring a diverse slate of candidates to include at least one  woman. Eleven stakeholders we interviewed supported boards  requiring a gender diverse slate of candidates.Two specifically  suggested that boards should aim for slates that are half women and  half men. Two of the 11 advocated that boards include more than one  woman on a slate of candidates, expressing concern that a board  policy requiring that only one woman be included on a slate could lead  to tokenism. This was also a concern for three of the five stakeholders  who did not support this strategy.
Setting voluntary targets. Ten stakeholders we interviewed  supported boards setting voluntary diversity targets with two  stakeholders citing the importance of having targets or internal goals  for monitoring progress. Four stakeholders opposed voluntary  targets. For example, one stakeholder thought that boards should  consider a diverse slate of candidates but expressed concern over  how voluntary diversity targets would work in the context of  considering board candidates’ skills.
Potential strategies for recruiting more female candidates on to boards  could include:
Expanding board searches. Of the 17 stakeholders who expressed  an opinion, all supported expanding board searches beyond the  traditional pool of CEO candidates to increase representation of  women on boards. Several stakeholders suggested, for example, that  boards recruit high performing women in other senior executive level  positions, or look for qualified female candidates in academia or the  nonprofit and government sectors. According to aggregate Employer  Information Report (EEO-1) data, roughly 29 percent of all senior  level managers in 2013 were women, suggesting that if boards were  to expand their director searches beyond CEOs more women might  be included in the candidate pool. Our analysis of EEO-1 data also  found that at the largest companies—those with more than 100,000  employees—women comprised 38 percent of all senior-level  managers in 2013, up from 26 percent in 2008. In addition, a few  stakeholders said boards need to be more open to appointing women  who have not served on boards before. One board director said  individuals are more likely to be asked to serve on additional boards  once they have prior board experience and have demonstrated they  are trustworthy.
Potential strategies that boards could implement to address the small  number of new directors that are appointed to boards each year could  include:
Expanding board size. Nine stakeholders we interviewed expressly  supported expanding board size either permanently or temporarily to  include more women, with five specifically supporting this strategy  only as a temporary measure.For example, one stakeholder’s board  temporarily expanded in size from 8 directors to 11 in anticipation of  retirements, but the stakeholder was not in favor of permanently  expanding the board size. Some stakeholders noted that expanding  board size might make sense if the board is not too large but  expressed concern about challenges associated with managing large  boards. Three stakeholders were not in favor of expanding board size  permanently or temporarily to increase the representation of women  on boards.
Adopting term limits or age limits. Five stakeholders we  interviewed supported boards adopting either term or age limits to  address low turnover and increase the representation of women.  However, most stakeholders were not in favor of these strategies and  several pointed out trade-offs to term and age limits. For example, a  CEO we interviewed said he would be open to limitations on tenure  for board directors, especially as the board appoints younger  candidates. However, he said directors with longer tenure possess  invaluable knowledge about a company that newer board directors  cannot be expected to possess. Many of the stakeholders not in favor  of these strategies noted that term and age limits seem arbitrary and  could result in the loss of high-performing directors.
Conducting board evaluations. Twelve stakeholders we interviewed  generally agreed it is good practice to conduct full-board or individual  director evaluations, or to use a skills matrix to identify gaps.  However, a few thought evaluation processes could be more robust or  said that board dynamics and culture can make it difficult to use  evaluations as a tool to increase turnover by removing under- performing directors from boards. The National Association of  Corporate Directors encourages boards to use evaluations not only as  a tool for assessing board director performance, but also as a means  to assess boardroom composition and gaps in skill sets. Several  stakeholders we interviewed discussed how it is important for boards  to identify skills gaps and strategically address them when a vacancy  occurs, and one stakeholder said doing so may help the board to think  more proactively about identifying diverse candidates.
In addition, almost all of the stakeholders we interviewed (18 of 19)  indicated that either CEOs or investors and shareholders play an  important role in promoting gender diversity on corporate boards. For  example, one stakeholder said CEOs may encourage boards to prioritize  diversity efforts by “setting the tone at the top” of companies and  acknowledging the benefits of diversity. In addition, several stakeholders  said that CEOs may serve as mentors for women and sponsor, or vouch  for, qualified women they know for board seats. One stakeholder we  interviewed developed a program to help women in senior management  positions become board-ready and has also recommended qualified  women when he was asked to serve on the board of other companies.  Nearly all of the stakeholders we interviewed (18 of 19) said that investors  play an important role in promoting gender diversity on corporate boards.  For example, almost all of the board directors and CEOs we interviewed  said that investors or shareholders may exert pressure on the companies  they invest in to prioritize diversity when recruiting new directors.  According to one board director we interviewed, boards listen to investors  more than any other actor, and they take heed when investors bring  attention to an issue.
section_title: Several Large Investors and Many Stakeholders We Interviewed Supported Improving Federal Disclosure Requirements on Board Diversity
paragraphs: While most stakeholders we interviewed emphasized their preference for  voluntary efforts by business to increase gender diversity on corporate  boards over government mandates such as quotas, several large public  pension fund investors and many stakeholders we interviewed (15 of 19)  supported improving federal disclosure requirements on board diversity.  Stakeholders were generally supportive of the government undertaking  efforts to raise awareness about gender diversity on boards or to collect  and disseminate information on board diversity. Most stakeholders we  interviewed (16 of 19), however, did not support government quotas as a  strategy to increase board gender diversity in the United States. Several  suggested that quotas may have unintended consequences—boards may  strive to meet the quota, but not to exceed it; boards may appoint  directors who are not the best fit for the board just to meet the quota; and  there may be the perception that women did not earn their board seat  because of their skills, but instead were appointed for purposes of  meeting a requirement. However, a few stakeholders and other  organizations and researchers we interviewed stated that quotas are an  effective means of achieving increased representation or that the  prospect of quotas may spur companies to take voluntary actions to  address gender diversity on boards.
While the SEC seeks to ensure that companies provide material  information to investors that they need to make informed investment and  voting decisions, we found information companies disclose on board  diversity is not always useful to investors who value this information.  According to SEC’s 2014-2018 Strategic Plan, one of the Commission’s  objectives is to structure disclosure requirements to ensure that investors  have access to useful, high-quality disclosure materials that facilitate  informed investment decision-making. The SEC notes in its strategic  plan that it is helpful for information to be provided in a concise, easy-to- use format tailored to investors’ needs. In addition, the SEC  acknowledges that the needs of investors may vary and that investors’  needs are affected by their backgrounds and goals.
Several large public pension fund investors and many of the stakeholders  we interviewed (12 of 19) called into question the usefulness of  information companies provide in response to SEC’s current disclosure  requirements. Specifically, in a recent petition to the SEC (investor  petition) to improve board nominee disclosure, a group of nine public fund  fiduciaries supervising the investment of over $1 trillion in assets stated  that some companies have used such broad definitions of diversity that  the concept conveys little meaning to investors. In its requirements for  company disclosure on board diversity, SEC leaves it up to companies to  define diversity in ways they consider appropriate. As a result, there is  variation in how much information companies provide in response to the  requirements as well as the type of information they provide. A recent  analysis of S&P 100 firms’ proxy statements from 2010 through 2013  found that most of the companies chose to define diversity to include  characteristics like relevant knowledge, skills, and experience.  Approximately half of the companies reported defining diversity to include  demographic factors such as gender, race, or ethnicity. Figure 6  illustrates the range of information companies provide on board diversity.  For example, Company A and Company D provide information on  demographic diversity and specifically disclosed the number of women on  the board; Company C combined information on gender diversity with  other demographic information; and Company B did not provide any  numerical information on demographic characteristics, including gender  diversity.
Furthermore, SEC’s requirement for companies to disclose information  related to a board policy for considering diversity in the nomination  process, if they have such a policy, may not yield useful information. For  example, the recent analysis of S&P 100 firms’ proxy statements  previously mentioned found that 8 of the 100 companies reviewed  disclosed the existence of a diversity policy in 2010 through 2013.  In  addition, according to the analysis, a substantial number of companies  disclosed the absence of a policy or were silent on the topic. According to  SEC’s requirements, if a board does have a policy, then it must provide  additional information on how the policy is implemented and assessed,  leading some investors and others we interviewed to question whether it  creates a disincentive for companies to disclose a policy.
The investor petition to the SEC supported improving existing disclosure  requirements and requested that the SEC require new disclosures on  board diversity specifically to indicate directors’ gender, racial, and ethnic  diversity in a chart or matrix in addition to their skills and experiences.  Those who submitted the investor petition believe there are benefits to  diverse boards, such as better managing risk and including different  viewpoints, and that having more specific information on individual  director diversity attributes is necessary for investors to fully exercise their  voting rights. They said that as large investors, they have an interest in  electing a slate of board directors who are well-positioned to help carry  out a company’s business strategy and meet their long-term investment  needs, and that for at least some investors, demographic diversity is an  important factor to consider when electing board directors.
Most of the 19 stakeholders we interviewed (15 of 19) also supported  improving SEC rules to require more specific information from public  companies on board diversity. In addition to increasing transparency,  some organizations and researchers we interviewed highlighted that  disclosing information on board diversity may cause companies to think  about diversity more and thus may be a useful strategy for increasing  pressure on companies to diversify their boards. Twelve stakeholders  we interviewed explicitly supported SEC requiring companies to  specifically disclose the number of women on the board; five others were  not opposed to disclosing this information; and two questioned whether  this specificity was necessary as companies already include the names of  board directors in their proxy statements or may include photos of  directors. While the investor petition acknowledged that some companies  provide aggregate board diversity information on gender and race, they  said diversity information at the board level is not available for all  companies. They also stated that it can be difficult to determine gender  diversity through proxy statements and is time-consuming to collect this  information on their own. Without specific information on board diversity  that is concise and easy-to-use, investors may not be fully informed in  making decisions. SEC officials told us they intend to consider the  investor petition requesting changes to board diversity disclosure as part  of its Disclosure Effectiveness Initiative—an ongoing review of all SEC  disclosure requirements to improve them for the benefit of companies and  investors. SEC’s review of its disclosure requirements provides an  opportunity for the agency to solicit broader input on making specific  changes to the disclosure requirements on board diversity.
section_title: Agency Comments
paragraphs: We provided a draft copy of this report to the Securities and Exchange  Commission and the Equal Employment Opportunity Commission for  review and comment. SEC staff provided technical comments that we  incorporated, as appropriate. EEOC did not have comments.
As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Chair of the Securities and Exchange  Commission, the Chair of the Equal Employment Opportunity  Commission, and other interested parties. In addition, the report will be  available at no charge on GAO’s website at http://www.gao.gov.
If you or your staff should have any questions about this report, please  contact me at (202) 512-7215 or sherrilla@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made key contributions to  this report are listed in appendix IV.
section_title: Appendix I: Analysis of Data for Boards of S&P 1500 Companies
paragraphs: To identify trends in women’s representation on corporate boards and  characteristics of male and female board directors, we analyzed a dataset  from Institutional Shareholder Services, Inc. (ISS) that contained  information about individual board directors at each company in the S&P  Composite 1500 from 1997 through 2014, the years for which they  collected these data.
subsections: section_title: Data Source
paragraphs: The ISS data include publicly available information on directors compiled  from company proxy statements and other U.S. Securities and Exchange  Commission (SEC) filings. The data include information such as gender,  age, committee memberships, race and ethnicity, and other  characteristics. To determine the reliability of the ISS data, we compared  it to other analyses of women’s board representation to see if our results  were comparable, interviewed knowledgeable ISS employees and other  researchers who have used ISS data, and conducted electronic testing of  the data. In cases where we did find discrepancies in the data, we  discussed the issue with ISS employees and either resolved the issue or  determined the specific data element was not sufficiently reliable for our  analysis and excluded it from our review. Based on our assessment of the  reliability of the ISS data generally and of data elements that were critical  to our analyses, we determined that they were sufficiently reliable for our  analyses.
section_title: Data on Company Size, Industry and Other Characteristics
paragraphs: We used ISS data to provide descriptive statistics on characteristics of  male and female board directors, including comparing the age and tenure  of female board directors to males, and we also presented information on  the representation of women by company size and industry. The ISS data  divided companies into the S&P 500 (large cap companies), S&P 400  (mid cap companies) and S&P 600 (small cap companies), which enabled  us to conduct analyses by company size. The companies that comprise  these indices, including the composite S&P 1500, may change each year  depending on the value of the company at the time the index is  established. Thus, our analysis is a point in time estimate for the index  based on the indices as they were in a certain year. The ISS data did not  include industry or sector for the companies in the dataset. We used data  from the Bloomberg Industry Classification System to identify the  industries for the companies in the ISS dataset by matching up the stock  market ticker. We were able to make these matches for 96 percent of the  director observations in the ISS data. When we could not make a match,  it was typically because we could not locate the ticker in the Bloomberg  data. This could be the case, for example, if a company experienced a  merger or dismantled.
In addition to presenting past trends and descriptive statistics on board  membership, we used the ISS data to determine the likelihood of a board  adding a woman based on the number of women already on the board.  Specifically, we computed how the percentage of boards that have added  a woman changes with the number of women already on the board. To do  this, we determined the proportion of companies with 0, 1, or 2 women on  the board that added a woman in that year. While we did not control for  other factors, such as industry, we did do this analysis separately for  large, medium, and small firms.
section_title: Projection Analysis
paragraphs: We also developed two hypothetical projections to illustrate future gender  representation on corporate boards. Neither of these projections is meant  to be predictive of what will happen over the coming decades. In one  scenario, we assumed an equal proportion of men and women join  boards each year starting in 2015. In the second scenario, we assumed  only women join boards as new board directors beginning in 2015. For  both projections, we made the following assumptions based on ISS data  on directors in the S&P 1500 from 1997 through 2014:
The total number of board directors in the S&P 1500 will stay constant  at 14,000 each year, based on the average of the total number of  board directors in the S&P 1500 in 2013 and 2014.
The total number of new board directors joining companies in the S&P  1500 will stay constant at 600 new directors each year, which is the  total average number of new board directors joining companies in the  S&P 1500 for the years of our analysis.
We used 600 as an indicator of the number of board directors leaving  their board positions each year. Women on boards tend to be younger  than men and have had less tenure in 2014. Therefore, we wanted to  assume that women leave the board at a slightly lower rate than men,  so we estimated the proportion of women among the 600 departing  board directors in each year would equal the proportion of women  who were on boards 10 years prior (when women were less  represented).
section_title: Appendix II: Stakeholders We Interviewed
subsections: section_title: Name / Current Title
paragraphs: In addition to the affiliations above, the CEOs and board directors we  interviewed collectively have experience serving at companies in a wide  range of industries, including the following:
Agilent Technologies, Inc.
Avaya
Avon Products, Inc.
Inc.
Companies Inc. eHealth, Inc.
Engility Holdings, Inc.
Exelixis, Inc.
Integrated Device Technology
Time Inc.
TJX Companies, Inc.
UNUM Corporation
Walmart  (IDT)
ION Media
Juno Therapeutics, Inc.
Kohl’s Corporation
Kraft Foods, Inc.
Westinghouse
Xerox Corporation
Yahoo! Inc.
section_title: Appendix III: Researchers and Organizations We Interviewed
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Clarita Mrena (Assistant  Director), Kate Blumenreich (Analyst-in-Charge), Ben Bolitzer, and  Meredith Moore made significant contributions to all phases of the work.  Also contributing to this report were James Bennett, David Chrisinger,  Kathy Leslie, James Rebbe, Walter Vance, and Laura Yahn.