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A Declaration of Independents: The Important Role Independent Directors Play on Diversifying & Strengthening Private Company Boards

April 22, 2021 – Today we’re excited to announce preliminary results from Bolster’s Board Benchmarking survey, our analysis of 250 private company boards. Through our research, we have uncovered demographic and compensation details of 650+ board directors and created a suggested set of action items that CEOs and board leaders can take to #flipthescript on board diversity.

Our most surprising finding is that only one-third of private company boards have independent directors today.

In other words: Two-thirds of private companies have only investors and management directors on their boards, limiting their capacity for outside perspectives at the most senior level. While it’s no secret that diverse teams build better businesses, our research indicates that board diversification is still not taking place broadly among private companies.

In fact, we found that early stage companies are less likely to have diverse boards than later stage companies. More than 60% of boards without either racial or gender diversity in our study occurred at the Series A stage and earlier. It also appears that some CEOs are leveraging independent director seats to add diversity: We found that women are three times as likely to hold independent director seats (compared to management or investor seats).

By contributing data to the overall conversation about board diversity, we hope to demystify information about private company boards, provide objective benchmarks, and offer an actionable set of takeaways for CEOs and board leaders.

To participate in the study and receive a more in-depth look at our results (including a look at our compensation comparisons among independent directors), sign up as a Bolster client here and complete your Board Benchmark survey.

Key findings:

  • Only 32% of private company boards have independent directors. Half of boards have open independent director seats they expect to fill in the next 12 months.
  • Compared with investor or management directors, independent director seats are 3 times as likely to be held by women. 86% of director seats overall are held by men, and 56% of early stage private company boards have no gender diversity at all.
  • Four out of five seats on private company boards are held by individuals who are White, and 43% of boards are completely homogenous with regard to the race/ethnicity of their directors.
  • CEOs are broadening their searches to diversify their boards. Two-thirds of CEOs are open to bringing on first-time directors, and 41% of independent directors have either some college or an under-graduate degree only (vs. a post-grad degree).
  • Board composition tends to over-index on investors and management directors. 59% of boards have more than one management or founder director and 59% of boards have 2 or more investor directors.
  • Men seem to have a slightly higher average earning potential (measured in basis points per year and grant value) compared to women directors at like companies.

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By the Numbers: A Case for Independent Directors

Only 1 in 3 private company boards have independent directors, but half of startup boards have open independent director seats

We found that only 32% of private company boards have at least one independent director, but 51% of CEOs intend to fill an independent director position in the next 12 months. While the current trends show that independents aren’t typically added to board until the Series C stage, this gap of unfilled seats today points to a potential opportunity for CEOs to leverage independents earlier to ultimately diversify their boards.

Private company boards aren’t optimized to bring on independent directors

Nearly 60% of boards have either 2+ management directors or 2+ investor directors. In both cases, CEOs are potentially duplicating board members with shared viewpoints, rather than introducing diverse perspectives. Notably, 45% of boards currently have an even number of directors, making it impossible for anyone to have a tie-breaking vote. Depending on the state that chartered your company, an odd number of directors might even be a legal requirement.

Women are more likely to hold independent seats than director or management seats

Compared with investor or management directors, independent director seats are 3 times more likely to be held by women. The more even gender diversity among independent directors shows us how CEOs may be leveraging independent seats as a means to expand their gender inclusivity.

Non-white board directors are uncommon and more likely to hold founder or management director seats

Four out of five startup board directors were identified as White. The space with which CEOs are open to diversification appears to end with gender; we found that only 21% of independents and 16% of investor directors were identified as Non-White.

CEOs and COOs are the most common background among independent directors

Of the independent directors in this study, 40% are current or former CEOs and 20% are current or former COOs, with CFO and CMO also noted as desirable backgrounds. This aligns with the three dozen board searches we have conducted since Bolster’s launch in September 2020, where the preferred background included: past CEOs, go-to-market leaders (CMO, CRO, CCO), CISO, Product or Product Marketing leaders, people with experience in partnerships/strategy, or COOs and CFOs. But take note: Given that inequities exist among individuals who obtain this level of job experience, these race and gender disparities may in turn be perpetuated in board membership.

Two-thirds of CEOs are open to bringing on first-time directors to their boards
CEOs are increasingly looking to recruit members from traditionally underrepresented populations to their board. They are also open to a broader range of candidates: Of board searches in our network, 89% of CEOs were specifically looking to add diversity, and two-thirds of CEOs indicated they are open to bringing first-time directors.

Not all independent directors have post-graduate degrees
Through an analysis of LinkedIn profile data, we sought to understand the education levels of independent directors on private company boards today. We found that 55% of independent directors have post-graduate degrees and 41% have either a college degree or only some college, indicating that CEOs are broadening their search criteria to maximize diversity.


Cash compensation is uncommon for independent directors
Of boards in our dataset, only 2% of independent directors received any sort of cash compensation. These companies were all at either the Series C or Series D+ stage. For the few companies that do offer cash compensation to directors, the compensation was structured in the form of a director fee (vs. a consultant agreement) 100% of the time.

Equity compensation is unequally distributed among independent directors
Of the independent directors we profiled we noticed that men seem to have a slightly higher average earning potential (measured in basis points per year and grant value) compared to women directors at like companies. While the data set that drives this observation is too small to be statistically significant, we thought it was important to surface this point now, and we will be keeping a close eye on it as the data set grows. One of our goals in publishing this study is to provide CEOs with better compensation benchmarks for board directors in order to help them remove any pay gaps or disparities among board directors.

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A Peek Under the Hood: Diversity & Composition of Private Company Boards

56% of early stage private company boards have no gender diversity
Compared with a recent CrunchBase study that found 51% of private company boards with $100M in funding now have at least one woman director, our study found that only 44% of early stage boards have at least one woman director. It’s also worth noting that 56% of early stage company boards have no gender diversity at all, only one of which included all women directors. As a whole, our findings uncovered that 85.6% of seats on private company boards are held by men, 14.2% of seats held by women, and 0.1% of seats were held by non-binary directors.

Notably, only 12% of boards in our study had more than one woman on the board. Of boards with at least one woman director, this individual was the founder 49% of the time.

Private company boards are by and large, racially homogenous

Of the private company boards profiled in our study, we found that 79% of seats are held by people who are White.

Many boards in our study were completely homogenous. When it comes to racial and ethnic diversity, 43% of companies have boards made up of directors from the same race or ethnicity. (This included primarily all-White boards but also two boards with all-Asian directors.)

Of the subset of Non-White board directors, 60% identified as Asian. When compared with population data in the U.S., the biggest representation disparity occurred among Black and Latinx individuals. Latinx and Black directors in our study each represented only 2% of the total sample set of directors surveyed, compared with U.S. population estimates of 19% and 13% respectively.

Most private company boards have a moderate amount of diversity by age

We found the distribution of age range of board directors matched a bell curve. 83% of companies have directors on their board spanning multiple age brackets as indicated in our study, but only 6% of board directors are over 60 years old.

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Key takeaways for CEOs and board leaders:

In partnership with several diversity, equity, and inclusion specialists at the corporate level, including the team at Just Work and Strata RMK, we have identified five actionable ways that CEOs and board leaders can #flipthescript on board diversity.

  1. Don’t “double up” on board seats. Make space for independents.
    The majority of private company boards have two or more management directors and more than two investor directors. By duplicating roles on boards (particularly among management team and founder directors), CEOs significantly reduce the ability to bring diverse perspectives around the boardroom. Resist the temptation to add your co-founder (or that second, third, or fourth investor) and instead pose the question, “What if we consider an independent director instead?” Remember: Just because someone on your team isn’t a voting member doesn’t mean they can’t add significant value and have influence in meetings.

  2. Bring on independent directors early and often.
    We found that most private company boards don’t have independent directors until the Series C financing round or later. By this point, a company without a diverse board has likely missed out on years’ worth of feedback on decisions relating to product, audience, and employee recruitment. Don’t play “catch up” with your board and your company. Starting out with a diverse board, even as early as the Seed Stage financing round, can maximize your impact. In board placements we’ve made at Bolster, many CEOs are looking to expand the reach of their board searches by considering first-time directors for these roles, which is another great way to extend your network. You might also look for directors who fall outside of traditional backgrounds (which may include differences in education, functional expertise, race/ethnicity, gender, or other forms of diversity), as well as individuals who embody principles of allyship and advocacy.

  3. Always be recruiting and building relationships with diversity in mind.
    The best company leaders are always recruiting, and this goes for board seats as well. Of the independent director searches we have conducted for Bolster clients, nearly 90% are looking to add diversity around the table. But the best CEOs know that recruiting starts, not with a candidate pipeline for a short-term search, but with relationship and network-building over time. Even if you don’t have an open board seat open today, it’s always a good idea to seek out diverse perspectives from other senior leaders. And as you do, be intentional about your interactions and look for ways to “quantify your bias.” Ask yourself: Are you only building relationships with people who look like you, or fall within a certain group? By measuring your bias, leaders can hold themselves accountable and take steps to interrupt unwanted patterns of conformity or homogeneity at the board level.

  4. If you’re a CEO, look for ways to build cohesion and inclusion on your board.
    Our study also found that a large number of boards have only one person from a particular background represented. But be wary of tokenizing individuals who may be adding much-needed diversity and look for opportunities to ensure that everyone has space to not only speak up, but also to be heard and taken seriously – and know that they don’t speak for everyone with similar demographics. Where possible, consider bringing on multiple new directors to deepen the impact of diverse voices. Keep in mind that any time you invite someone to bring a unique perspective, this will change the group dynamic and reset the team development framework: Form, Storm, Norm, and Perform. As a leader, it’s your job to make space for these diverse voices.

    Once you’ve successfully built a diverse board, be intentional around how you are onboarding and including all directors. Take an honest look at the inclusivity of your board protocols, communication style, and corporate culture. Look at how airtime is distributed, whether you or other members introduce bias into meetings, and how comfortable your directors feel offering dissenting viewpoints. One red flag: If your board always agrees with each other, this might be an indicator that one or more people feel uncomfortable speaking up. To keep an eye toward inclusion in meetings, you might introduce the Just Work framework of “bias interruptions” – a simple word or phrase that calls out bias in the moment and can reorient the group.

  5. If you’re a board director or corporate executive, look for ways to practice advocacy and broaden access for others.
    While much of the conversation around board-building best practices is focused on CEOs, every executive and board director should play a role in board diversity. If you’re on a board and part of a group of people represented by the majority (typically, white men), consider mentoring first-time directors on your board, or taking on an observer seat to make space for an independent. Look for ways to practice advocacy on behalf of others. Unlike allyship, which promotes individual behaviors of solidarity such as being aware of your influence and amplifying others’ voices, advocacy goes a step further. Board room advocates can take on an active role in private and group settings to defend or support the interests of other groups. Some groups even participate in “equity pause” moments to ask themselves key questions including, “Do we have the right people in the room? What perspectives might we be missing? What biases may be showing up here, and how can we help mitigate them?”

    And whether you’re a board leader or a corporate executive, you can look for ways to broaden access to board opportunities. Reach out to your networks and identify senior-level executives from traditionally underrepresented backgrounds and invite them to observe board meetings or join the company as an Advisor, and make sure they stay on your radar the next time a seat opens up. At Bolster, we’re building our executive member network in partnership with 50+ professional organizations who refer their diverse members to us for board and executive-level opportunities. When every executive invests in their own networks and connections, you’ll always be ready with a diverse short-list of candidates.

For more advice and practical, actionable ways CEOs and board leaders can foster inclusive and fair environments in and out of the board room, read more about Just Work’s framework here.

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About the Study

A more detailed, interactive view of these results (which includes a look at board compensation) is available at no charge to any CEO who creates a Bolster account and shares data from their own board. We encourage you to create a Bolster account and participate in this important study here.

We are building the most comprehensive data set around private company boards. The information captured has been reported directly from CEOs. It also exposes for the first time what boards look like even at the most nascent stages – more than 50% of responses come from companies at a Series A stage or earlier.

This survey will remain open as a real-time benchmarking application on Bolster’s platform for startup and scaleup CEOs, including an aggregated look at cash and/or equity compensation and vesting details for private company board directors.

This data, effective March 17, 2021, was gathered first-hand from CEOs or other executives from 250 private companies from more than 250 venture capital firms in Bolster’s data set. There was no fee to participate. The distribution of companies based on stage was: Founder Funded (2%), Seed/Angel (34%), Series A (23%), Series B (15%), Series C (15%), and Series D+ (12%). While the majority of respondents are from U.S.-based companies, we did have some international companies in the data set. The largest geographic markets represented in this study included California, New York, the midwest (including Indiana, Colorado, and Illinois), and international markets. While the companies in this study spanned across 30 industries, the largest industries represented included SaaS, Computer Software and IT services.

We’d like to thank our Accelerator and VC partners that played an important role in encouraging CEOs to participate in this study. Firms that had a critical mass of portfolio companies completing the survey include: Bonfire Ventures, Costanoa, Foundry Group, High Alpha, Matchstick Ventures, Redpoint, Sequoia, Techstars, True Ventures, Uncork, and Union Square Ventures.

If you have any questions about this work, please contact Bethany Crystal at bethany.crystal@bolster.com.

--Bethany Crystal, April 22, 2021