The progress for board diversity has been steady but slow. In 2020, the percentage of board seats held by women was approximately 28 percent. While this is significantly higher than the 10 percent figure in 1995, it represents a less than 1 percent average annual rate of change over the past 25 years. Globally, the U.S. ranks 18th among developed nations for the number of women on boards. Other underrepresented groups have made even less progress, although it is hard to obtain an accurate figure since most companies do not disclose ethnicity in board bios. Some of the best available data puts the number of Black, Hispanic and Asian men and women directors at just over 20 percent on a combined basis.
To address this issue, below are nine actionable solutions, along with practical advice from participants of a virtual convening forum “Bold Leaders, Actionable Solutions,” comprised of board and executive leaders, held October 2020 and hosted by Ellig Group and SHRM. Ideas were shared to effectuate change on a larger scale.
1. Diversify the Nominating and Governance committee first. Make sure that the board’s diverse directors serve on this very important committee. Board members indicated that when the Nominating and Governance committee was itself diverse, the progress in reaching overall board diversity goals was amplified significantly.
“I always try to weasel my way onto the Nominating and Governance committees of all boards that I have joined. Once in that role, I would always make sure that the slate for new directors includes women; today I push for 50 percent of the slate candidates are women. My philosophy has always been to use one hand to move myself forward and use the other hand to yank another woman up onto the boards where I serve right behind me. I always took it as a responsibility, a key element of my leadership.” —Maggie Wilderotter, Chairman and CEO, Grand Reserve Inn; director, Lyft, Inc., HYPE, Costco Wholesale Corporation, DocuSign (Chair), Hewlett Packard Enterprise Company, Tanium Inc., Sana Biotechnology, Sonoma Biotherapeutics
2. Increase transparency. Many felt that making specific diversity goals and committing to them publicly was the most important lever to pull if a board is really committed to achieving diversity goals. First, the board must agree on the ideal mix of gender and ethnic/racial diversity, and then commit publicly to achieving that goal. One director said that it would be unimaginable that a company would not achieve that goal once it had been discussed publicly. Of course, this must be carefully considered given recent legal actions taken by shareholders in response to companies that have not achieved previously disclosed diversity and inclusion (D&I) goals.
“The goal needs to be public—not just within the company—because then we will be held to a standard of our own setting.” —Kay Koplovitz, Chairman and Co-founder, Springboard Enterprises; director, ION Media Networks, Veniam
3. Demand diverse slates. Once the target is set, the board must be willing to hold the Nominating and Governance committee and any retained search firms accountable for providing a diverse slate for consideration. One CEO, who also serves on other public company boards, said that corporations would never accept the kind of poor performance that many search firms have demonstrated in providing a diverse slate.
“If you think about it, there is no other part of our business where we engage advisors and accept five different options when only one truly achieves the objective. Why would search be any different than any other work that we judge based on the outcomes? The stakes and the desired outcome are just as clear.” —Stephan Tanda, President and CEO, AptarGroup, Inc.; director, AptarGroup, Ingredion Incorporated
4. Refresh the board. Show courage and encourage turnover on the board. Board members must show more courage in removing board members who are no longer contributing. This outcome was also tied to instituting and conducting more robust annual assessments—specifically “individual director” assessments.
“Individual directors have an obligation to the board that they look in the mirror on any given day and ask themselves, ‘Are you bringing your A game?’” —Les Brun, Chairman and CEO, SARR Group, LLC; Broadridge Financial Solutions (Lead Director), CDK Global Inc. (Chair), Merck & Co. (Lead Director), Corning Inc., Footprint International Holdco, Inc.
5. Sponsor/develop diverse executive talent. Board members and executives are uniquely positioned to help expand the pool of diverse candidates by sponsoring, encouraging and mentoring the promising executives from underrepresented groups within the company. More and more CEOs are launching mentorship programs for senior executives in the company to help them prepare for and identify board opportunities, and more and more boards are willing participants in those initiatives.
“The HR leadership needs to recruit more diverse executives into P&L and executive leadership roles so they are attractive board member candidates; we can solve for the lack of diversity on boards by improving candidate flow. As board members, you must strongly encourage the CEO and the CHRO to help bring the right executive-level talent into your organization so that they will one day be competitive for board vacancies.” —Johnny C. Taylor, Jr., SHRM-SCP, President and CEO, SHRM
6. Add a seat. Many directors talked about the need to “always be looking”—not simply waiting for a seat to open. In addition, as the size of the board has been largely unchanged over the past 10 years (average of 10-11 members), there was a broad consensus that a board could consider adding a seat to achieve greater diversity. It is always important to make sure the board is the right size, but if low turnover is a reality for a board, it may accelerate progress by expanding the size of the board rather than waiting for a vacancy.
“If all the leaders who have expressed support just went out and executed, we could be where we want to be in a matter of a couple of years versus decades of a glacial 1 percent per annum. If the leader is committed, if we believe in it and we want to execute, we do it even if it means adding a seat. The talent is out there. We were explicit with the search firm (we are using today) on the criteria upfront, and we've been blown away by the quality. Quality sells the decision.” —Truett Tate, Chairman of the Board, QBE North America; director, Reference Point (Chair), FIMBA (Chair), Medicus (Chair), The Social Book Club (Chair), Equal Future
7. Refuse to serve on a board. Leaders should affiliate only with socially minded boards that demonstrate a commitment to diversity, equity and inclusion (DEI) principles. This is a pretty important statement about the perceived reputational risk of affiliating oneself with a company that has not made meaningful progress on DEI. It was noted that this is a more powerful statement if a director voices that position to the chair and the CEO directly when refusing to be considered.
“I have been in the situation where I was a new member of a board that was a ‘good, old boy’ board. As the board cohort was refreshed, we became intentional with our efforts to diversify the board; our biases were holding us back. There are younger people that are ready. There are functional leaders that are ready. Would I join a board that wasn’t diverse today? Honestly, if a CEO does not have the spirit of intent to make that change, count me out.” —Richard Davis, CEO, Make-a-Wish Foundation; former Executive Chairman, CEO and President, U.S. Bank; director, Dow Inc., Mastercard Incorporated
8. Open the aperture. As slow as diversity progress has been in the boardroom, it has been even slower in the CEO office. Women and ethnically/racially diverse CEOs in the Russell 3000 are still exceedingly rare. To truly open the aperture, boards need to be willing to consider candidates with functional/specialized expertise and skills and to consider those without public board experience. This is happening, but it needs to be embraced more universally.
“Intentionality is really critical. For so long, we heard ‘we can’t find candidates.’ It was all about the ‘can’ts.’ We just decided that diversity matters and found great candidates. In the end, you can’t give up.” —Pat Russo, Board Chair, Hewlett Packard Enterprise; director, KKR & Co., General Motors, Merck & Co.
9. Broaden the network. According to studies by PWC, nearly 90 percent of boards surveyed say that they primarily seek new directors from their existing network. As over 70 percent of the current S&P 500 board seats are held by mostly white men, it seems likely that boards are “fishing in the same pond.” Boards must realize the limitations of this approach and seek candidates from a broader network if they want to find untapped women and underrepresented board members.
“We have to be aware that sometimes we create a problem by wanting to go with people that are known entities to us. We go around the room and say, ‘Well, who do you know?’ and those individuals often then have an edge over the diverse candidates that the search firm provides. That being said, people that want to get on boards should not underestimate the power of networking. However, as directors, we have to ensure that we do the hard work around identifying strong candidates and not bias ourselves by shortcutting the process and defaulting to those that we already have relationships with.” —Dawn Zier, Former CEO, Nutrisystem; director, The Hain Celestial Group, Spirit Airlines, Prestige Consumer Healthcare
“If every board sets aspirational goals, we can achieve gender parity by 2025 by doing what the Committee of Economic Development promulgated nearly five years ago: just fill every other opening with a woman. The supply is there, it is a demand issue. Being focused and intentional will achieve results.” —Janice Ellig, CEO, Ellig Group