Companies, meanwhile, remain opposed to efforts to promote diversity, noting they agree with proponents' arguments but disagree with the process. Bed, Bath & Beyond, for example, asked shareholders to vote against the resolution, arguing the proposal was "inappropriately restrictive, would unduly limit the Company in its selection of Directors, would involve cost in time and effort without any commensurate benefit and would, therefore, be detrimental to the best interests of the Company and its shareholders."

Notably, Monster Worldwide management took the unusual step this year of making no vote recommendation on a diversity proposal. Vote results from the June 7 annual meeting are not yet available.

Trends
As might be expected, larger U.S. companies have more diverse boards. S&P 500 companies are almost twice as likely to have a woman or a minority on the board than small-cap companies. Overall, only 12 percent of all directorships are held by women, and only 10 percent are held by members of a racial or ethnic minority group, according to data gathered by ISS' Governance Research Service from 1,269 companies in the S&P 1,500 that held their meetings between Jan. 1 and July 31, 2005. The data are largely based on proxy filings for fiscal 2004.

Moreover, only 1.2 percent of directorships are held by minority women, suggesting that few companies use this approach in responding to calls for increased diversification. The opportunity for diversity on boards may be hindered by the lack of diversity in the executive suite, where most companies recruit their directors. Less than one percent of all directorships are held by female CEOs, and the same holds true for minority CEOs. Because so few women and minorities hold top executive positions, companies often are competing for the same individuals to fill board vacancies.

Given the recent reforms requiring increased director independence, there has been speculation that companies would recruit women and minority directors in higher proportions than in years past. As women and minority directors tend to be more independent than their counterparts (89 percent of women directors and 86 percent of minority directors are independent), some observers predicted that women and minority directors would be sought out to meet the new independence requirements. It appears that this may be somewhat true only in the case of women. Fifteen percent of directors that have been added to boards in the last year are women, but minorities account for only 5 percent of these new directors.

In addition to the new independence requirements, disclosure laws adopted in late 2003 by the Securities and Exchange Commission now require increased disclosure concerning the director nomination process. Companies must now disclose: the criteria used by the nominating committee to screen nominee candidates, including shareholder recommendations; the qualifications the nominating committee believes company directors, or a given director, should have; the nominating committee's process for developing and considering nominees; the source of each of the board's nominees, including the use of third parties to identify potential nominees; and the nominating committee's policy with regard to the consideration of shareholder recommendations, among other things.

Traditionally, boards have often relied on the relationships and knowledge of current board members in recruiting new directors--a process that has perpetuated the all-white, all-male board. The new disclosure rules, by putting pressure on the nominating process, held promise to open the door to increased diversity. However, the overall percentages of women and minority directors has remained stable amid the implementation of the nominating disclosure and independence reforms.

Female Directors
The overall proportion of female directors increased by 1 percentage point from 2004 to 12 percent in 2005 (as reported in 2004), indicating the recruitment of women to boards has increased very slowly over the past six years (in 1999, women accounted for 9 percent of all directorships). Women are significantly more likely to serve on the boards of larger companies. Fifteen percent of all directors at S&P 500 companies are women, compared to 8 percent at small-cap companies.

Overall, however, 70 percent of the study companies had at least one female director as of 2005. Though the incidence of boards without any women directors has varied slightly from year to year, the general trend has been for more boards to include at least one female. Company size is clearly correlated to female representation on the board--the larger the company, the more likely it is to have at least one woman director. Nonetheless, mid-cap companies have seen the biggest jump since 1999, when only 59 percent of the companies in that index had a female director.

There is a clear correlation between company size and the incidence of female directors. This also holds true when size is measured in terms of revenue: 98 percent of companies with revenue of $10 billion or more had at least one woman director on their boards; conversely, only 43 percent of companies in the smallest revenue band (less than $500 million in revenue) had at least one female on the board. The proportion rises along with revenue, to 59 percent for companies in the $500 million-$1 billion band, to 74 percent in the $1 billion-$3 billion band, and to 84 percent in the $3 billion-$10 billion band.

The percentage of companies including women on their boards varies considerably by economic sector. Firms in the utilities sector are the most likely to include at least one woman on the board, although more females hold directorships overall in the consumer discretionary products sector. Conversely, companies in the energy and information technology sectors are the least likely to have women serving on their boards and also have the lowest percentage of female directors overall.

It does appear that companies are trying to recruit female directors. Based on analysis of directorships over 2004-2005, 15 percent of those who were new to the board during the period were women, versus 11 percent among those directors who were already serving prior to 2004. The rate of females to the board appears to be greater than the existing female representation on boards, indicating that adding female directors is a growing trend. The study found that at least 24 companies (five more than last year's list) have at least four women on their boards. Among those were Albertson's, New York Times, and SBC Communications, which each had six female directors.

Attributes of Female Directors
Women directors are more likely to be independent from the company where they sit on the board than directors generally. Eighty-nine percent of directorships held by women are classified as independent, as compared to 72 percent of directorships overall, and only 69 percent of directorships held by men. Only 7 percent of women directors were considered affiliated, versus 12 percent of male directors. These differences between the general independence levels of male and female directors underscore the failure of new independence rules to stimulate substantial diversity on the board, however. While 93 percent of the female directors who first joined their boards in the last two years are independent, they represent only 16 percent of all the new directors during that period.

Few women directors are employees at firms where they sit on boards, reflecting the small though growing numbers of women in top executive positions. Only 66 women are employees of the company where they serve on the board, representing one-half of a percent of directorships overall. Twenty-four of these women are CEOs of their firm, with the highest proportion represented in the consumer discretionary sector.