In 2023, a fifth (20 per cent) of board positions across the globe were filled by individuals that belong to historically underrepresented groups or ethnicities, with nearly a third within their first two years of tenure, according to a report by McKinsey & Company.

The report, which polled more than 1,200 companies across 23 countries, found just 16 per cent of executive team members belong to a historically underrepresented ethnic group — a slight improvement from 14 per cent in 2020. Among respondents, the weighted average rate of ethnic diversity representation for historically underrepresented groups in 2023 was 35 per cent and the equivalent weighted rate of representation was 15 per cent on executive teams and 18 per cent on boards.

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It also found gender representation has accelerated, with roughly 15 per cent of women on boards still in their first year of serving. However, boards continue to be more diverse than executive teams (29 per cent women and 19 per cent underrepresented ethnic groups versus 20 per cent and 15 percent, respectively). Notably, just five per cent of companies have no women on their boards — a substantial improvement since 2019.

Companies in the report’s top quartile for ethnic diversity were found to gain an average 27 per cent financial advantage over others with less ethnic representation. Similarly, companies with representation of women exceeding 30 per cent were also significantly more likely to financially outperform those with representation of 30 per cent or fewer. Meanwhile, companies in the top quartile for both gender and ethnic diversity in executive teams are on average nine per cent more likely to outperform their peers.

Those in the bottom quartile for both were found 66 per cent less likely to outperform financially on average, indicating that lack of diversity may be getting more expensive. Companies in the top quartile of board gender diversity were also found 27 per cent more likely than those in the bottom quartile to outperform financially and those in the last quartile were 17 per cent less likely to outperform than those with boards in the top quartiles.

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