Board Diversity: What Are You Waiting For?
by Patricia Lenkov, Founder and Principal at Agility Executive Search
The burden of proof has been met. Diverse boards make better decisions that lead to improved company performance. Yet despite the research and validation and the increasing prodding by institutional investors, state and city governments and all types of social and nonprofit organizations, a startling 1805 companies out of 3192 (companies from the Fortune 1000 and Russell 3000) in a gender diversity index created by 2020 Women on Boards have zero or only one women on their boards. African Americans, Hispanics and Asians are even more underrepresented relative to their presence in the overall workforce.
So what’s the problem? What is holding us back from the progress we desperately need? I offer three main explanations:
Legacy folklore proclaims that there are simply not enough qualified diverse candidates to fill board seats. We have heard this time and again. In 2013 when Twitter went public without one female on their board they said that they could not find women who had the technical skills necessary for their technology company. In fact, most of their all-male board members had arts degrees!
Demand for more diverse candidates, and the opportunity to diversify boards, is further dampened by the fact that director tenures are often too long. The concept of board refreshment or even board turnover and succession planning are new. It wasn’t that long ago that board appointments were thought to be for a lifetime. Clearly, there has been a shortage of demand for diversity on the part of boards…but just as clearly, demand for change on the part of investors is gaining traction every day.
Despite the many people who say otherwise, there is in fact an excellent supply of qualified and diverse board candidates. Companies, however, need to identify them and to make conscious and continual efforts to get them into the pipeline.
Diverse employees (actually everyone) need to think about their careers as limitless. They need to be able to advocate for themselves and to gain exposure within the decision making circles that count in the boardroom. They need to work towards positions at the highest levels and they must gain operating experience whenever and as often as possible. They need to find good mentors - and advocates. Also, I always say that if you want to be a board director you must be able to be found. It seems so basic doesn‘t it? So where is the missing link? Quite simply, it’s the corporate commitment to making progress on stronger diversity.
The Matchmaking Process:
Finally, and perhaps most importantly, is the process by which board directors are currently being recruited. Recent research shows that 70% of the time a director role is filled by using a personal network or a word of mouth recommendation. This means that most often, finding a new director goes like this: the board, CEO and ‘trusted advisors’ discuss people they know for a director opening at the company.
Finally, and perhaps most importantly, is the process by which board directors are currently being recruited. Recent research shows that 70% of the time a director role is filled by using a personal network or a word of mouth recommendation. This means that most often, finding a new director goes like this: the board, CEO and ‘trusted advisors’ discuss people they know for a director opening at the company. Hopefully, their qualifications enter the discussion. But oftentimes, the main qualification is that this new person is known by someone from within the company’s circle of trust. This process is neither objective nor strategic. It will yield a result, albeit one that is usually far from optimal.
The rest of the time an executive search firm is engaged. Although this is an improvement over the hit-or-miss nature of the first approach, it is far from foolproof. All search firms are not created equal, and this is particularly true with respect to diversity. It is one thing to jump on the issue today, as it is clearly a “hot topic” - but boards are where they are because of the mistakes of the past.