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. 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. 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. 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. 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). 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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). 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. 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.

Summary: 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. 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.