It’s encouraging to see that progress is being made in increasing diversity on corporate boards, especially when it comes to women directors.
Here’s another encouraging fact: between 2010 and 2020 female representation among new S&P 500 directors grew from 21% to 47%.
However, we still have work to do to bring up the total number of women serving on boards. At the end of 2020, they represented 28% of the total S&P 500 board seats. That’s an increase of just 2% from the prior year.
Clearly, women are making progress. But we still have a long way to go.
No progress for ethnic minorities
Even more concerning is the fact that in 2020 ethnic minorities made no progress in getting appointed to new S&P 500 board seats, according to the same report.
Ethnic minorities accounted for 22% of the 413 new independent directors that were appointed last year. And while that figure is significantly better than it was 10 years ago, it’s actually down by 1% from 2019.
If we drill down by ethnic background we see that:
- 11% of the new appointees were Black (down from 13% in 2019 but up 6% from 10 years ago)
- 8% were Asian, up 1% from 2019 and 3% 10 years ago.
- 3% were Hispanic, the same as it was 10 years ago. This is in stark contrast with an ethnic group that, according to the US census, today represents 18% (60 million) of the US population, and that is expected to grow by 25% (to 75 million) by 2030. Unless we change the trend, the largest ethnic group in the US will be severely underrepresented in the major corporate boards for years to come.
The relatively small number of S&P 500 board openings (around 400) that become available each year are the windows of opportunity for companies to add diversity to their boards.
Here is the crux of the issue. Some companies claim they have a hard time finding qualified, diverse candidate for those 400 or so seats. At the same time, qualified individuals claim they have a hard time getting noticed by the companies who are looking for them.
Clearly, the problem is not a lack of candidates but a lack of ways to connect.
In my opinion, the traditional approaches need to be revisited by both companies and individuals. I’d like to offer a few suggestions to each group.
ADVICE FOR COMPANIES
- Look at different talent pools. Companies that are having trouble finding qualified diverse candidates may want to consider complementing their current search firm with the help of another firm that has access to different candidate pools, or replacing the current firm if necessary.
- Increase board size temporarily. Because qualified, diverse candidates are hard to find, I suggest that boards that foresee upcoming retirements don’t wait until that seat becomes available to begin their search. Instead, when they find a qualified candidate, they can temporarily expand their board in order to bring on that person early, before he or she is no longer available.
- Consider potential CEOs. Companies typically look for current or retired CEOs to fill their board seats. However, some companies are now finding it more effective to expand their pool of candidates to include up-and-coming C-suite executives who have significant potential to become CEOs and bring them on early before they are named to such a post.
These tactics work. I have seen them being used very successfully by the boards on which I serve. Two of those boards just added four excellent directors (two women and three ethnic minorities) using these approaches. I know these recommendations are worthy of a board’s consideration.
ADVICE FOR INDIVIDUALS
- Get board experience. Prepare yourself to serve on a public board by serving on a private-company or non-profit board early in your career. That’s what did when I joined the board of Junior Achievement of Georgia. That experience was priceless. I learned how boards operate, the processes and protocols they use, and how to properly serve on a board. That eventually led to my being appointed chairman of the board of JA Worldwide, a non-profit organization that helps 10 million young people each year in 100 countries. Another benefit of joining private-company and non-profit boards is that you get to meet influential people who are icons in the community.
- Get noticed. Companies typically find board candidates through personal affiliations, recommendations from associates, and executive search firms. But in the digital era, there is another way.Board Prospects, an online service that vets and matches prospective directors with companies looking to fill board seats. Many individuals are not familiar with this great organization, but I am a member and can vouch for the great work they do to match individuals with companies.
- Network. Find ways to connect with people who serve on public boards or who are in positions to recommend you. As I said before, serving on a private-company or non-profit board is a great way to make yourself known to such individuals. You may also consider connecting with organizations such as the Latino Corporate Directors Association (LCDA), which helps qualified individuals network and get placed. There are similar organizations out there helping women, African-Americans, Asians, and other diverse individuals.
Diversity and inclusion at the top
The number of minority individuals in this country is going to continue to increase. That makes it imperative for companies that are looking to thrive in a more diverse environment to have more diversity at the top, both in their leadership teams and their boards.
In my experience, I have found that diversity and inclusion are good for business and are the right thing to do. When you have a team of talented, diverse individuals operating in an inclusive environment, they deliver amazing results, often far and above what they even thought possible.
And isn’t that the best definition of a great organization?