The push to diversify boards of U.S. companies has been a longstanding issue in corporate America. In the wake of George Floyd’s killing, many CEOs of U.S. public companies wrote pieces pledging to fight racism and own up to past shortcomings. Concrete commitments were made, often including pledges to increase the diversity among boards and C-suites. The re-energized national conversation on race, coupled with impatience around our sluggish improvement towards gender equity in the board room, has created a unique historical moment to accelerate progress.
Much of the drive to diversify boards stems from a simple ethical motivation to address lingering racism in every sphere of society. As a Black woman, I see this desire to improve as genuine and inspiring. Yet, in addition to the moral justification for diversifying boards, there is a strong business case to be made as well.
For one, corporate leaders understand the U.S. is becoming a minority-majority society: White people will make up less than 50% of the population by 2045. Women and communities of color account for an increasing share of economic purchasing power and members of these groups expect the companies they do business with to embrace inclusive policies. From a reputational perspective, companies do not want to be seen as laggards in regard to diversity—whether in governance, executive leadership, or any other domain.
Moreover, recent moves by government and industry are making board diversity a necessity. A California law requires that companies headquartered in the state have diverse boards: for example, a board with nine or more members must have at least three directors from under-represented communities. As of 2021, Goldman Sachs will require that any company it takes public have at least two diverse board members. And on December 1, NASDAQ announced it would ask the SEC for permission to require all member companies to have at least one woman and one diverse board member.
Beyond PR considerations and industry or legal requirements, diverse boards frequently function more effectively. Too often, new board members are selected from networks of existing board personnel, sharing similar experiences and perspectives. Lack of diversity—whether it be gender, ethnic, age, skill, or philosophy—can constrain a board’s “cognitive breadth,” resulting in directors that may be unable to compensate for one another’s blind spots.
In contrast, diverse boards bring talent with different lived experience and a wider range of perspectives. High performing, diverse boards can objectively examine a range of opinions and feel psychologically safe in challenging one another. A diverse board’s understanding of nonwhite customers and employees will have depth and nuance. Fewer important issues will be overlooked, discussion will be robust, and decision making will improve.
The numbers show how far we have to go, especially with Black women and Latinas. In 2018, Black women comprised 6.8% of the adult population and 7.8% of all undergraduates, but only 2.7% of directors in Fortune 500 companies. Under-representation of Latina women is even worse. Latinas comprise 7.4% of the adult population, 12% of undergraduates, but less than 1% of all directors.
Issues of gender are inseparable from issues of race. It is well known that Black and Latino people in general are underrepresented at the senior-most levels of U.S. businesses, including boards. Less widely appreciated is that women of color at senior levels of corporate power are under-represented within their own groups. For example, as of 2018, 68% of all Black directors were men, as were 80% of all Latino directors. Companies need to consider gender and race together.
In my capacity as CEO of The Health Management Academy, I regularly speak with leaders of the nation’s largest health systems and private and publicly held healthcare companies. I am encouraged by their honest commitment to greater understanding and to the enhancement of diversity, equity, and inclusion. The dialog around race and gender in 2021 is more authentic, serious, and determined than it has ever been.
So the question remains—how will we meet this moment? What are a few concrete steps that any organization can take to advance representation of Black women and Latinas across C-Suite and board roles? I’ll be back next week with concrete advice on improving #race and #gender equity in the executive ranks.