The Next Frontier for Boardroom Diversity: Private Companies

The glass ceiling hasn’t been completely shattered, but it is definitely splintering with more cracks. According to a recent Spencer Stuart Board Index report, every company on the S&P company index now has at least one woman on the board, and 47 percent of new directors appointed over the past year are women – the highest such year-over-year percentage increase. Credit goes all around for this boost in boardroom diversity: activist investors who have pressured companies, institutional investors who have made their case for having a more diverse board and the threat of mandates by state governments in California and Illinois. Companies can spin this trend all they want, but the trend is more out of self-interest than being a part of any “community.”

As many in business like to say, self-regulation is better than regulation coming from government. Nevertheless, this increased trend of boardroom diversity bodes well for professionals who have the skills, tenacity and chops, but not the connections in the good old boys network.

But for private companies, which do not have to face such pressure from regulatory agencies, investors or stock exchanges, we see a different narrative.

A new Crunchbase study suggests that while there has been improvement on boardroom diversity within privately-owned companies, such change can at best be described as mild “progress.” For private companies that have been founded since 2003 and have cumulative funding of at least $100 million as of last June, Crunchbase and its partner on this project, the social impact venture Him For Her, found 49 percent of the 350 companies they vetted lack any women on their boards.

That’s an improvement from the 60 percent reported during the previous year, yet there is still a long road ahead: The study concludes that at this rate, we won’t see women on later-stage private company boards until 2025, and anything nearing gender parity will be a decade away.

Plenty of evidence suggests that there’s a correlation between a company’s financial performance and it having some level of boardroom diversity. Beyond the bottom-line arguments, however, reality will dawn on many of these companies sooner than later. A good number of these companies are at the stage where they can mull becoming listed on public markets; and investment banks like Goldman Sachs have made it clear they won’t consider taking a company public unless their board shows some level of diversity. In that vein, Nasdaq has proposed similar requirements in order for companies to list on its exchange.

“These measures have the potential to push companies to diversify their boards earlier, instead of waiting until they face the scrutiny of public investors. But so far, these efforts are not enough,” wrote Emma Hinchliffe for Fortune earlier this week.

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