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Board Diversity: Action Needed Now

Molly Brennan

Diversity is a critical ingredient for organizational performance. Whether you’re a company making widgets or a non-profit changing the world, a diverse staff and leadership team provides critical, necessary advantages when it comes to strategic decision-making and, ultimately, overall performance. Contributor Molly Brennan Founding Partner – Koya Leadership Partners.

Many organisations have begun to make progress on the staff side, thanks in part to a movement to shed light on a lack of staff diversity in the tech sector. But board leadership in both the private and nonprofits sectors has remained stubbornly homogenous for decades.

Women currently occupy only 18 percent of board seats at the biggest companies, and only 10 percent of leading independent directors and 4 percent of board chairs are women. The stats for racial diversity are even more grim, with some studies showing that 15 percent of board seats at the top 200 S&P 500 companies belong to racial minorities.

The nonprofit sector mirrors this lack of diversity in leadership at the organizational and board level. The percentage of people of color in nonprofit board seats has remained under 20 percent for the last 15 years, and shows no signs of changing despite growing awareness of the strategic, financial, and social benefits of diversity.

What’s keeping these boards from doing what they know they should for their organizations and shareholders? There are three key reasons for this persistent lack of progress. 

First, there’s a significant lack of accountability. Until corporations and nonprofits are more routinely exposed as homogenous, and stakeholders begin to demand change, not much will happen. 

But the wave of accountability appears to be building. Last year, BlackRock, Inc, the world’s largest asset manager, sent letters to companies on the Russell 1000 Index with fewer than two women on their boards, asking them to justify this lack of gender diversity and report on efforts to increase diversity. “Irrespective of a company’s industry, location or size, we believe that a lack of diversity on the board undermines its ability to make effective strategic decisions,” BlackRock said in the letter signed by Michelle Edkins, global head of investment stewardship.

California just passed a new law requiring publicly traded corporations headquartered in that state to include at least one woman on their boards of directors by the end of 2019, a minimum that increases over time. Companies that fail to comply face fines of $100,000 for a first violation and $300,000 for subsequent violations. 

These legal and PR nudges will force some boards to begin taking action. But history shows us that change is likely to be slow, which is the second reason boards have not made progress with diversity: They aren’t fully committed to creating change, especially when it’s likely to be uncomfortable. 

To achieve true change, boards must look inward, and commit to upsetting the status quo, which is, in most cases, beneficial to the very board members who must lead the charge for change. Sharing power isn’t easy, especially when it comes to sharing power with historically underrepresented groups. But that’s exactly what corporate and nonprofit boards must do to remain competitive and achieve their missions in today’s diverse world. 

The third reason: Most board members truly don’t know what to do to become more inclusive and diverse. Individual members recognize the theoretical value of inclusion and diversity, and they understand the pressure to become more diverse is growing. But when it comes to actually taking action, boards seem to be clueless. 

Take board recruiting, for example. When boards recruit on their own, they typically lean on personal networks and relationships, which creates a self-fulfilling cycle. Sociology tells us that most people’s networks reflect themselves. When a male, white, upper middle-class board member looks to his own network to fill a board seat, he’s most likely going to find male, white, upper-middle class individuals. 

To become more diverse, boards must go beyond their personal networks, recognize their own biases, and truly commit to building diverse pipelines of talent for the future. This is possible, but requires a willingness to drive through discomfort, make the case for change, and hold individual board members accountable. 

The only way this is going to happen is for key stakeholders – including investors, shareholders, and elected officials – to demand change. We’ve seen how public outcry and exposure about a lack of diversity can kick-start awareness, and eventually, change, in the tech sector. Thanks to the efforts of a small group of individuals and journalists, that sector has been exposed as shockingly homogenous, and leaders are scrambling to diversify. The same can happen for boards, but it will require a concerted effort from the outside as well as leadership within. 

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