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Apr 26, 2019

Silicon Valley catching up on board diversity

Change coming slowly after years of attention

Technology and life sciences public companies in Silicon Valley are boosting the number of women directors on their board at a faster rate than among the S&P 100 as the industry evolves, new research shows.

Between 2016 and the 2018 proxy season, the largest 15 companies in the Silicon Valley 150 Index (SV 150) increased the average number of women directors on their board by 3.6 percentage points to 25.8 percent – ahead of the S&P 100, according to a study by Fenwick & West. The SV Top 15 has until recently lagged the S&P 100 in terms of board diversity.

Among companies that have a lead director, the SV Top 15 has more frequently tended to have a woman in the role in recent years. As of 2018, 28.6 percent of the largest Silicon Valley firms with a lead director have a woman in the seat, compared to 14.5 percent among the S&P 100.

The study finds that the average percentage of women directors on the boards of the SV 150 – 17.7 percent – still lags that of the S&P 100 (24.7 percent) as of the 2018 proxy season. But the SV 150 has raised that participation level by 3 percentage points since 2016, compared with an increase of just 1.6 percentage points among the S&P 100, according to the study.

For the last few years, all members of the S&P 100 and the SV Top 15 have had at least one woman director. Among the SV 150 overall, the percentage of companies with at least one woman director increased 7.6 percentage points to 81.6 percent between 2016 and last year.

The low level of diversity at the top of Silicon Valley firms has attracted attention for a number of years. The report’s authors write that the reasons for the relative lack of women on boards of the SV 150 include:

  • CEOs generally sit on their own board, and women are underrepresented among chief executives
  • Tech start-ups have relatively few women in senior leadership and board seats
  • Venture capitalists (VCs) account for a major proportion of independent directorships at newly post-IPO tech companies as a holdover from their role during the private company stage. Women tend to make up a small percentage of the VC community
  • Public company board turnover tends to be slow
  • Nominating committees traditionally focus on looking for CEOs to fill board spots.

David Bell, partner with Fenwick & West, explains the growing board diversity at Silicon Valley companies as partly a result of cyclical changes: as companies move beyond their IPO, VC directors cycle out. Many tech companies have started adding directors with expertise in areas such as marketing, a field in which women feature more prominently, he tells Corporate Secretary. Companies are also expanding their board recruitment beyond CEOs, and such broader searches offer more opportunities for women, he adds.

The more rapid progress among the SV Top 15 is due in part to such factors and also to the negative attention Silicon Valley has received, Bell says.

Overall, size still matters in that larger companies tend to have larger boards and executive management teams, which tend to be more diverse, the report states. Size can be more important than the industry, although Silicon Valley is improving board diversity quicker than the S&P 100 regardless, Bell notes.

California governor Jerry Brown in September 2018 signed a new law requiring public companies headquartered in the state to have at least one woman on their board in calendar year 2019. The law will also require companies to have at least two women on boards that have five or more total directors, and at least three women on boards of six or more directors in calendar year 2021.

According to the Fenwick & West survey, all SV Top 15 and S&P 100 companies meet the 2019 standard, while 82 percent of the SV 150 already comply. But only slightly more than half (53 percent) of the SV Top 15 and just 18 percent of the SV 150 meet the 2021 standard. Around three quarters of the S&P 100 are ready.

Dawn Belt, partner with Fenwick & West, says that although most companies meet the 2019 standard, they are planning ahead. ‘[We have] not yet sensed desperation,’ she tells Corporate Secretary.

Bell describes progress toward greater diversity so far as ‘steady but slow.’ The law may help that. ‘Our expectation is that there will be a bit of a bump over the next couple of years,’ he says. ‘No company wants to be the one singled out in the first enforcement [of the law].’


Ben Maiden

Ben Maiden is the editor-at-large of Governance Intelligence, an IR Media publication, having joined the company in December 2016. He is based in New York. Ben was previously managing editor of Compliance Reporter, covering regulatory and compliance...