Pharma Governance and the Quest for Gender Equity

You may have missed the headline at the turn of the year heralding some positive news: A record 32% of S&P 500 board seats are now held by women, up from 30% the previous year. It is good news. But it reminds me how far we still have to go—and left me wondering about the pace of the biopharmaceutical industry’s own journey toward more gender-equitable boards of directors.

We have all seen the data: Diverse-led companies are more likely to have greater financial returns than their less-diverse industry peers. And we also know that major investors, proxy advisors, and stock exchanges are pressing for change.

As a new public company, Organon was faced with the challenge and the opportunity to recruit its entire board of directors at the same time. The result of the company’s intentional process was a group of highly distinguished and highly diverse directors. With 70% women, Bloomberg just recognized Organon as having the most female board members for any S&P 500 company.

But what are the broader trends in board diversity across large pharma? I worked with a team to review gender representation on the boards of the top five pharmaceutical companies (based on market capitalization and GICS sub-industry classification) in the US and Europe as well as the top three pharmaceutical companies in Japan. We looked at public information included in proxy statements, annual reports and 10-Ks, and environmental, social, and governance (ESG) or sustainability reports in 2010, 2015, 2020, and the most recently available information to conduct the analysis.

The data reflect an industry that is changing—but at an uneven pace across time and regions. Here are some of the findings:

• Gender equity in pharma’s largest board rooms mirror overall corporate trends. Overall, in 2021, there was an average of 4.2 female directors or a 32% female representation for the boards across the 13 companies reviewed. In an industry where it is commonly observed that women make the majority of healthcare decisions for a household,¹ I suggest that 32% is not the right number.
• US-based pharma lead in gender diversity—but only by a small margin and only in recent years. In our analysis, in 2021, the top five US companies led with an average of 38% female board representation, followed by Europe at 35% and Japan at 16%. However, when looking at the 2010-2015 time period, Europe was in the lead, having moved relatively quickly from 19% to 31% female representation. US and Japanese companies generally improved the gender diversity of their boards much more recently.
• Different regions, all with needed progress. If we look at average growth rates in the percentage of female directors from 2010 to 2020, we can expect the US cohort to reach gender parity in 2029, followed closely by their European peers in 2032. Japan is not expected to reach gender parity until after 2100. And of course it remains far from certain that historical growth trends will continue at the same rate in any region given the historically low rate of director turnover on most major corporate boards.

Can pharma pick up the pace?

This snapshot of gender diversity on pharma’s boards offers a moment of reflection as we stand at the juncture of so many changing forces. The policy environment continues to change; the European Parliament, for example, recently adopted a new EU directive on gender balance on corporate boards. Women’s economic empowerment initiatives are finding significant resonance. The importance of diversity in clinical trials is widely acknowledged, as are the wide gaps in women’s health innovation. Finally, the pandemic has had a dramatic and disproportionate impact on women’s careers.

The pharma industry has made significant progress in the past two decades, demonstrated by the large companies we analyzed moving from an average of 16% of women on their governing boards in 2010 to 32% today. But we can do better. Both business and society demand that we pick up the pace.

Geralyn Ritter, head of external affairs and ESG at Organon and author of Bone by Bone. In this role, she focuses on guiding and shaping how the company interacts with key stakeholders and the environment.

Reference

1. US Department of Labor, Employee Benefits Security Administration, General Facts on Women and Job Based Health.