Continuing our consideration of challenges governing board members face, in this post we address the diversity of the governing board.
Diversity – Perhaps the most contentious subject regarding the makeup of a governing board is its diversity. DEI (diversity, equity, and inclusion) has become a political lightning rod in several states and the controversy has carried over into schools and colleges. However, DEI continues to be included on the agendas of governing boards in academe, business, government, and nonprofit organizations. When he was Walmart’s CEO, Mike Duke recognized customers wanted to see people within Walmart’s organization who “looked like them.” Numerous leaders shared with my leadership class that a strong team is a diverse team. Unfortunately, too many view diversity through a narrow lens.
A question governing boards must address is how well they mirror what they expect within the organizations they govern. “Do as I say versus do as I do” is a challenge all governing boards face, especially when it comes to DEI.
Quite commonly, the old boys’ network is used to identify board candidates. When it’s not used, too often, tokenism occurs.
In recent years, an increasing number of women have served as CEOs of U.S. companies and as CEOs of universities. FORTUNE magazine reported that a record number of CEOs in the Fortune 500 were women in 2020. However, very few CEOs are African Americans, Asian Americans, Latinas, or Native Americans, and the number of CEOs who are women is far less than it should be.
When David Rubenstein asked Christine Lagarde, President of the European Central Bank, why more women should be on corporate boards and CEOs, she pointed out that an analysis of results shows as more women are included on corporate boards and in C-suite positions, the greater the financial returns for the company. She also said, “So, even if you have a very, very cold heart, no moral imperative, and no sympathy for women and for the principle of inclusion, you have to consider including women and bringing them to the table and to all the tables.”
Motivated by an article by Paula Loop, leader of PwC’s Governance Insights Center, in which she provided data on the number of women serving on governing boards, I reflected on the makeup of boards on which I served. Most didn’t model the board’s expectations of management insofar as increasing the diversity of the executive team. In essence, we asked management to do something we weren’t doing—we weren’t walking our talk. I was also reminded of the makeup of the UA System Board of Trustees. Typically, there is one woman, one African American man, and eight Caucasian men among the ten trustees appointed by the governor. To my knowledge, no Asian American, Native American, or Latino has served on the UA System Board of Trustees.
Motivated by Loop’s article, in 2019 I performed a non-scientific sample of websites of twenty-six university governing boards to identify the percentage of women. The results ranged from forty-seven percent to ten percent. My search of twenty-eight corporate governing boards yielded percentages ranging from fifty-five to fourteen percent. Interestingly, more progress has been made in increasing diversity on Federal Reserve Bank boards than on corporate boards. Reuters reported, “The Federal Reserve, long criticized for being too white and male, crossed a substantial milestone last year; for the first time in its 107-year history, white men held fewer than half of board seats at the Fed’s 12 regional outposts.”[i]
Before leaving the subject of governing board diversity, lest you wonder, I have mixed feelings about establishing quotas. On the one hand, I’m reminded me of the impact Title IX has had on the participation of women in intercollegiate athletics. After universities had ample time to increase the opportunities for women to participate, the federal government stepped in and mandated it.
Instead of quotas, I favor understanding the power of diversity, with proof being manifested in the makeup of the governing board. I favor taking steps to ensure you have a diverse pool of candidates. Based on my experience, if a diverse pool of candidates is considered and the selection is based on merit, cream will rise to the top and the governing board will be diverse. However, at times, intervention is required to shift the tectonic plates of resistance to change.
Next Week: Governing Board Challenges – Part 4
[i] Ann Saphir and Lindsay Dunsmuir, “Too white, too male: Fed takes on diversity one bank board member at a time,” Reuters, February 27, 2020.