Despite progress in the last few years, changing existing board demographics will likely take years at current rates. Here’s what your board needs to think about.
The recognition for greater diversity and equity on boards has come from direct pressure on three main fronts: regulatory quotas, listing exchanges and institutional investors – see my February 2021 blog. That trend will remain in 2022. And while ¾ of S&P 500 boards remain white and 70% remain male, according to Spencer Stuart, there has been an increase in efforts from private entities to change this dynamic.
In addition to long-standing efforts by organizations such as 50/50 Women on Boards, there are new training programs like National Association of Corporate Directors new program called Accelerate, which connects diverse candidates with board opportunities and offers candidates with no board experience an opportunity to get training. Likewise, more targeted groups, such as the Black Boardroom Initiative, an effort started last June by law firm Perkins Coie LLP (and backed financially by Amazon, Microsoft and Zillow), aims to change board composition in the precise area of diversity they traditionally lack. The Alliance for Board Diversity (ABD) – a group of four organizations (Hispanic Association of Corporate Responsibility, Catalyst, The Executive Leadership Council, and Leadership Education for Asian Pacifics) – share the goal of advancing the inclusion of women and minorities on corporate boards. In collaboration with Deloitte, the ABD conducts research to assess the status of board diversity on Fortune 500 boards and notes that black and latinx representation falls far short. Boards need to get involved in these programs.
Likewise, boards need to pay attention to their dialogue on diversity, equity and inclusion (DEI), especially as companies ready themselves to submit data on their employees’ race, sex, ethnicity, and job groups to the U.S. Equal Employment Opportunity Commission starting April 12, 2022.
According to a recent post by Margaret Hylas and Olivia senior consultants at Semler Brossy, the way in which boards talk about DEI signifies their commitment to it. In order to evaluate how board members assess performance management around DEI, investors, consumers and others should pay attention to these key questions:
- What information does the board receive on DEI? Is it primarily a report-out on key statistics, or does it go beyond the current state and include details on the company’s long-term strategy and goals?
- Is the board aware of who leads the charge on the company’s DEI strategy? Can the board hear from those individuals and from diverse members of management?
- Does the board have visibility on how key DEI statistics have progressed over time? Is the board aware of how progress compares to external and/or peer standards?
- Are the definitions of success clear? Does the board know what the right goals should be? Is there sufficient room for board dialogue to test the rigor of goals?
- Are the indicators of “something went wrong” clear to the board? For areas where the company misses the mark, is the board aware of the key drivers and needed course corrections?
- Does the board discuss messaging and disclosure both internally and externally?
These efforts are a strong step forward and yet the DEI milestones that boards so want to convey will inevitably fall short if board directors remain reluctant to retire. As the Spencer Stuart survey found, companies that are boosting their diversity are often adding new seats rather than replacing existing directors. True board refreshment, then, will also likely not be achieved.