Diversity: A long way to go on the Board of Directors
Despite the fact that important steps have been taken in terms of diversity at the corporate level, much remains to be done in this area.
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Although it was recently known that Latinos are represented on 60% of the boards of F10 companies, in the aspect of diversity related to boards of private companies, a lot of commitment is still needed to materialize this type of culture at the corporate level.
LCDA is Moving the Needle–Latinos represent the current & future market growth as 2 in 10 Americans & contributing 25% of the nation’s GDP. With the recent appointment of #LCDAMember, R. Martin Chavez, to the Alphabet Inc. Board, #Latinos are now represented on 60% of F10 boards! pic.twitter.com/Z63u2rw3l4— Latino Directors (@LatinoDirectors) July 25, 2022
On this same subject, Mandy Wright, senior editor of Directorship magazine and NACD BoardTalk, highlights in an article, published on the National Association of Corporate Directors (NACD) website, the study conducted by Him For Her and Crunchbase in 2021 on diversity on private company boards.
According to the report, only 14% of the positions on the boards of the best-funded private organizations are held by women, and close to 40% of the companies studied do not have them on their boards.
The study also indicates that only 19% of private company board positions studied are held by men of color, and only 3% by women of color.
Wright also underscores the findings of the 2021 US Spencer Stuart Board Index, highlighting the large gap between levels of diversity on public and private company boards, especially with respect to gender.
According to the report, women make up 30% of board positions at S&P 500 firms, but only 10% of these positions are held by women from historically underrepresented racial and ethnic groups.
Barriers to Diversity
“There are also limitations in defining diversity itself,” Wright points out, referring to scenarios where the concept is limited to specific communities, leaving groups historically considered diverse outside the law.
Wright specifically points to the case of California's AB 979, which mandated that boards have or explain why they do not have members from underrepresented racial and ethnic groups or the LGBTQ+ community, excluding other groups with other unique perspectives.
“While the law targeted public companies headquartered in the state, this is one example of a prominent definition of board diversity that is incomplete. When the definition is narrow, as when skills criteria and directors’ networks are narrow, the results of searching for diversity will be narrow, too,” said Wright.
How to Move Forward on the Path to Diversity in Boards?
Wright outlines six steps to try to move forward effectively in the implementation of boards that strongly support diversity as a means to build better companies.
1. Official policies: The implementation of measures to demand diversity in corporate boards, although companies do not like external mandates, are a way to open a broader path in this search.
“As of Sept. 30, 2021, women held 1,844 California public company board seats compared to 766 seats in 2018, when SB 826 was first signed into law,” said Neeti Dewan, board member of the Indo-American Chamber of Commerce—Atlanta and Symmr, and chair of Global Platinum AdvantEdge.
2. Director mentality: Beyond policies or mandates that demand diversity in the boards, this will not be effective if it is not appropriated with conviction by each of the directors.
Wright noted: “Most people have seen the studies that demonstrate that diversity improves performance and boosts innovation, not to mention that it allows companies to better connect with employees and customers. But when it comes to adding diversity to the board, some private companies may find their directors asking, ‘why fix something that’s not broken’?”
3. The Pipeline: This highlights the importance of promoting diverse workers to the highest ranks within investment firms, as well as executives in the most well-funded private companies, thus seeking to increase their share of investor and executive board positions.
“It’s an intercompany effort. As the boards of investment firms and private companies pay closer attention to the talent pipeline in and below the C-suite, they and other private company boards will benefit from the improved pool of diverse talent,” said Alicia Syrett, chair of Digimarc, founder of Madam Chair, and founder and CEO of Pantegrion Capital.
4. The search criteria: Considering that only 24% of C-suite positions in public and private companies are held by women, the exclusive criteria of "CEO experience" must be expanded if it seeks to promote diversity in the directories.
“Limiting the pool of talent to only CEOs will lead to complaints of there not being enough qualified women to fill board roles—a common, but inaccurate, conclusion. Critical skills for board work such as financial, technology, human resources, innovation, and other expertise are honed in many other leadership roles,” underlined Wright.
5. Networks: Directors can also take it upon themselves to diversify their networks, including by engaging with groups such as the Latino Corporate Directors Association (LCDA), the Executive Leadership Council, and Out Leadership.
6. Transparency: Making information about who sits on private company boards public on their websites would help hold companies accountable and promote diversity as a board standard.
“You don’t need to be a CEO to be able to serve on these boards, because the way our economy is changing, the way our businesses are changing, and the way [stakeholder] needs are changing, you don’t have to be a CEO. There are so many other specific qualities that a board leader needs to bring to the table,” highlighted Dewan.