Editor’s note: Veteran entrepreneur and investor Donald Thompson writes a weekly column for WRAL TechWire about business management, startups, diversity, equality and other important issues. His column appears on Wednesdays.
RESEARCH TRIANGLE PARK – Everything we know about diversity, equity and inclusion (DEI) proves that companies with diverse boards simply perform better. They have higher revenue, higher talent retention and higher productivity. They make stronger, faster decisions and show better innovation. Yet across America and in North Carolina specifically, corporate boards are still overwhelmingly White and male, according to reports from Harvard Law, UNC Chapel Hill and, most recently, the MIssing Pieces Report: Board Diversity Census from Deloitte.
As a habitual board member and certified diversity executive (CDE) who has experienced the impact a great board can make on business outcomes and workplace culture, this is a challenge that speaks to me personally. That’s why, for this week’s column, I’m republishing a piece I wrote in November 2020 about improving board diversity. Despite a tremendous increase in corporate commitments to DEI [diversity, equity, inclusion] over the past 12 months, little has changed at the board level. It’s time we shifted that trajectory.
If you’re a board member or a C-suite executive who wants to improve board diversity, I invite you to join me next Thursday, October 28th at 12:00 pm E.T. for a 1-hour panel discussion on Increasing Diversity From the Top Down: Why Board Diversity Matters to Your Organization. Along with panelists Hilda Pinnix-Ragland, Paul Dillon, and Suzanne Miglucci, I’ll share action-oriented strategies for developing a diverse board member pipeline and discuss ways to improve DEI education at the board level so that members can model inclusive behavior and advocate for organization-wide DEI implementation.
In the meantime, here’s what you should know about the current state of board diversity and a few first steps you can take to improve your corporate board.
We are late to the game
The last decade has seen a global push for corporate board diversity, mostly through legislation and mandatory quotas. In 2012, the European Commission proposed a 40% goal for women in board positions in all publicly listed companies. With no similar federal legislation in the United States, California and Colorado have led the charge from a state level, mandating specific quotas for board members from underrepresented demographics, and a handful of other states are following suit.
Finally, the private sector is joining the movement, prioritizing internal diversity and sometimes even penalizing the companies they work with for not doing the same. Early last year, Goldman Sachs made waves by announcing they would not go public with companies that did not have at least one diverse board member. And this year, fund giants like Black Rock and Vanguard have raised their expectations in regards to people of color, as they had previously done in regards to women directors.
What it looks like for women and people of color
Women — who make up more than 50% of the U.S. population and 56% of U.S. college graduates — hold only 26.5% of board seats in the Fortune 500. Women of color face even more daunting numbers, comprising nearly 18% of the general population but holding only 5.7% of board seats in the Fortune 500. These lackluster numbers aren’t enough to create impact. In fact, research from Catalyst shows that “women need to hold at least three board seats to create a ‘critical mass,’ which can lead to better financial performance” and that “reaching critical mass can change boardroom dynamics substantially, creating an environment in which innovative ideas can spring from gender diversity.”
I would argue the same point regarding culturally diverse and underrepresented groups. Inviting more diverse identities into the boardroom will change the dynamics of leadership from the top, but we cannot be invited as tokens of diversity. Real change requires critical mass.
Let’s pick up the pace
Business and life are not separate bubbles; they are deeply interconnected. Especially in this time of economic uncertainty, with such a bright spotlight on racial inequity, companies who reflect the communities they impact will be better equipped to handle challenges and survive change. Otherwise, we’re not only missing out on talent but missing out on the diversity of thought, experience and perspective that make us sustainable, innovative and successful. Corporate boards seem to be moving in the right direction but far too slowly. Here’s how I think we can move forward faster:
Consider your sources
The most common way to recruit new board members is to ask for referrals and recommendations from current board members and CEOs. Yet we know that most people predominantly socialize within their own gender, ethnic, economic and generational groups. That means, using personal and professional networks as a recruitment tactic will only perpetuate the status quo of White, male boards. It also may be one of the reasons why “in 2020, nearly 36% (more than one-third) of diverse board seats are occupied by persons on multiple Fortune 500 boards,” according to the Missing Pieces Report.
So, where are you finding your new board members, and how can you expand that search to reach more diverse candidates? Consider a partnership with your local chamber of commerce, community leaders, advocacy groups, or colleges and universities with MBA and executive education programs. Keep an open invitation for resumes on your website, and make sure to note that you are always looking for strong future members, even those who may not have previous experience.
Create a talent pipeline
Attracting great talent should be a strategic imperative long before you have an opening on the board. Do your homework to proactively widen the search for new members. Create a Board of Advisors or a small group of non-voting Board Observers who can help to expand diversity of thought. You’ll benefit from their expertise, experience, and perspectives in the meantime.
The number one excuse I have heard from my colleagues is that people with little to no board experience need much more guidance and formal training about board responsibilities and compliance. Ok, maybe you can’t find “perfect” candidates; then train them up instead! Board Observers and Advisors become your first-picks for full board membership. They gain experience, and you gain their advice as they grow into valuable consultants.
Look beyond gender and ethnicity
Good leadership also requires that we look beyond the narrow, traditional definition of gender and ethnic diversity to account for socioeconomics, age, expertise and more. Does your board include employee representation? And, not just as a form of tokenism but in a way that can actually foster change? Socioeconomic board diversity — including non-executive employees as full board members — gives your employees a voice at the table and has been proven to benefit income equality.
Embrace generational differences as well. A separate report from Harvard University shows American boards are getting older every year. Inviting younger members not only models inclusion but also offers an opportunity to tap subject matter experts in various components of your business needs. Younger members often bring learning agility and a resourceful, adventurous spirit. The Millennial and Gen Z generations are too big and too powerful to be ignored. Inviting their perspective at the upper echelons of power will inherently make your organization stronger.
If your board is homogenous and you have no openings, increase exposure
If your board is all White, all male, all C-suite executives, all upper middle class and all 65+, but you know you won’t have openings soon, think about what you can do right now to expose your current board members to people who aren’t like them. Hire trainers, consultants and strategic advisors that are culturally diverse. Look for ways to connect your board members with frontline professionals within your organization and with non-White, non-male community groups.
Boards are powerful for two main reasons. They select the people who lead the organization, and they set the agenda for strategy and vision. Essentially, they are decision-making and networking teams. Therefore, a lack of diversity in the boardroom means uninspired decision-making, limited partnerships and slower innovation. Those boards become a limiting factor for organizational success.
Understanding the current state of board diversity requires us to reflect on our standards for excellence. What does success really look like, and how can we push for leadership diversity that reflects the diversity of our frontline teams, customers and communities? If you have innovative solutions, reach out to me on LinkedIn or leave me a comment below. Let’s keep moving the conversation forward.
About the Author
Donald Thompson is a serial entrepreneur, angel investor, author, podcaster, public speaker and member of numerous corporate and not-for-profit boards, including The Raleigh Chamber, Vidant Medical and TowneBank Raleigh. He is also an executive coach, Certified Diversity Executive (CDE) and co-founder and CEO of The Diversity Movement. With two decades of experience growing and leading firms, Donald is a thought leader on goal achievement, influencing company culture and driving exponential growth. His autobiography, “Underestimated: A CEO’s Unlikely Journey to Success,” will be available in 2022. The panel discussion he mentions, “Increasing Diversity, From the Top Down: Why Board Diversity Matters to Your Organization,” will take place next Thursday, October 28th at 12:00 pm ET. Registration is open now.