Fortune 500s suffer from a deficit of boardroom diversity
There is a disturbing trend happening in today’s corporate boardrooms, according to the Executive Leadership Council, a professional organization for African-American corporate leaders. The number of African-American board directors is declining.
While statistically African-Americans make up just under 10 percent of board seats, continued progress has been startlingly low over the last few years. A 2008 study by the Alliance for Board Diversity discovered that out of 24 new board seats added from September 30, 2004 to April 30, 2006, white males were selected for 21 of them. It also found that, at the time, 14 Fortune 100 companies had no African-Americans on their board and six of them didn’t include a single minority director.
This is not what Michele J. Hooper expected 22 years after first joining Target’s board of directors. Hooper, who is currently a director for United Health Group, AstraZeneca PLC, Warner Music Group, and PPG Industries, Inc., believed by this time in her career she would be working alongside many more minorities and women in the boardroom. She had never considered that she would still be one of the few African-American female directors in the country.
“There is a push to increase minorities on corporate boards,” Hooper says. “It’s just still a very slow movement. It’s moving at a glacial pace unfortunately.”
Dr. Ancella Livers, the Executive Director of ELC’s Institute for Leadership Development and Research, believes companies are still maintaining a significant white male majority, leaving diverse candidates to simply vie for the seats of other minorities and women. For example, minority women made modest gains from 2004 to 2006, increasing their share to 4 percent, but only at the expense of minority males and white women according to the Alliance for Board Diversity’s 2008 study.
“It’s like you have one room in the house, and you’re always rearranging the furniture,” says Dr. Livers. “Depending upon if you get a couch in, you might have to throw out a chair. You’re always rearranging the furniture in that same room while the rest of the house pretty much stays the same.”
While shareholders ultimately elect directors onto a company’s board, actually getting your name on the slate is the first step and a major hurdle for many diverse candidates. “Getting on a board is really hard work,” Dr. Livers explained. “Part of what’s difficult about the way the process has been run in the past is that pretty much you have to know somebody. People have to already know about you before they can get you on the board.” And this disconnect is what inspired Michele Hooper to start her own search firm.
In 2003, Hooper and eight other female corporate directors founded the Director’s Council, a recruiting company that identifies and recommends women and minority candidates for director roles. They all felt that traditional search firms just weren’t cutting it.
“We were disappointed and frustrated at the limited or lack of diversity that was coming through on the slates for director candidates when we would be looking for directors,” Hooper replied. “We felt that, being female and diverse individuals, we had the network of individuals that we felt were capable and qualified to sit on boards.” Since then, Hooper has placed top diverse talent to several prominent company boards, including recommending Chief Financial Officer and Senior Vice President of Eli Lilly, Derica Rice, to Target Corporation’s board of directors.
John Rice, founder of Management Leadership for Tomorrow, shares Hooper’s desires for diversity and hopes to supply the pipeline of future corporate directors. MLT, a nonprofit originally geared towards preparing minority college graduates for early career positions and top MBA programs, has expanded its mission to include mid-career professionals this past year. The Career Advancement Program, or CAP, provides executive coaching to high potential mid-career minority professionals that are identified and enrolled by their company for an 8 to 9 month program.
“Ultimately, what’s happening is that African-Americans, and minorities in general, who aspire to those board seats are finding out too late what it takes to be an outstanding and highly attractive candidate,” said Rice. CAP has so far been a success with over a third of its mid-career managers having already been promoted. And, Rice says, most of the corporate partners, including Google, Fannie Mae, Target, and Booz Allen Hamilton, are planning to more than double their participation for next year.
Such initiatives to increase board diversity will only be bolstered as the federal government has recently adopted new rules by which corporations will have to abide. This past February, the Securities and Exchange Commission began enforcing new laws that requires corporations to disclose how diversity is considered by a nominating committee in identifying candidates for director. While this will hopefully force some corporate boards to be more transparent and diligent in trying to achieve diversity, there are other corporations that have long touted how big of a role diversity plays in acquiring talent and increasing their bottom lines.
Successful Fortune 500 companies like Aetna, a leading health insurance company, and Darden Restaurants, Inc., the world’s largest full-service restaurant company, both boast African-American CEOs and chairmen and have received accolades for the diversity of their corporate boards. Aetna even has a majority of women and minority corporate directors; and they’ve also established a separate board that is responsible for the diversity strategy of the company.
“Aetna’s commitment to diversity expands not only to the board,” explained Elease Wright, Aetna’s Senior Vice President of Human Resources, “but to all people in the organization, from folks we hire and also to any of the vendors that we use… It’s really a historical philosophy.” Wright adds, “It just makes good business sense.”
Darden Restaurants, a multi-billion dollar company that includes restaurant chains Red Lobster and Olive Garden, couldn’t agree more. “Our business reflects our guest base. We serve folks from all walks of life and certainly our employee makeup reflects that guest base as well,” declared Darden’s corporate spokesperson, Rich Jeffers. “And we think that helps us understand what our guests are looking for…Our results speak for themselves.”
Proponents for board diversity hope that this movement by the private and public sectors will help motivate all Fortune 500 corporations to follow suit and initiate more diversity on their boards. More details about African-Americans in the boardroom as well as statistics for women and other minorities will be revealed later on this year when both the Executive Leadership Council and the Alliance for Board Diversity release their latest reports.