Despite the increasing discussion about diversity in the corporate environment, progress has not kept up with demand. This has been particularly true with respect to upper management and leadership positions. A recent report by McKinsey highlights the discrepancy between the diversity promise and the reality:
- Although 10% of U.S. college graduates are Black, this group comprises only 4% of senior executive positions;
- Hispanics are 8% of U.S. college graduates, but hold only 4% of executive positions; and
- Asian Americans, who account for 7% of total graduates, comprise only 5% of executive positions.
Boards should promote diversity by example
There is no precise formula for determining the makeup of a board. Typically, boards include members with a level of expertise that will be valuable to the company's area of business. One would expect to find aviation experts sitting on an airline company board, for example. Often boards seek out members with a particular area of expertise that ties to a particular challenge, such as cybersecurity, in today's environment. Finally, boards fill seats with people with knowledge of basic business fundamentals, such as finance and marketing. While there has been some progress in promoting diversity in filling board seats, Deloitte recently reported that in 2018, only 16.1% of board seats were held by people of color and women held only 22.5% of board seats in Fortune 500 companies. Unfortunately, though improving, these figures indicate that there has not been a truly significant shift in diversity since 2010. Despite these results, there is a general consensus that current board focus on diversity will result in change. ''Almost every board today has a strong focus on becoming more diverse - on diversity of thought, on bringing all the right voices together around the table. That is a huge change, and it's happening,'' says Meyer.Boards should educate their company on the value of diversity
Diversity helps bring different perspectives to the table on the important issues that challenge companies. It is important for the board to assure that management understands the host of benefits that diverse thinking adds to a company:- Diverse cultural perspectives can bring creativity to company initiatives and promote innovation;
- People with diverse backgrounds can dramatically increase market awareness;
- Broadening talent pools with diversity can help companies both attract and retain good people and key talent;
- A diverse base of skills can help a company to discover a wider and more adaptable portfolio of products and services; and
- Diverse teams have been found to be more productive and to promote increased opportunities for both personal and professional growth.
Boards can guide and monitor company efforts to increase diversity
First and foremost, boards must understand the numerous steps that management can take to promote diversity. The board should develop a system to educate and to help the company implement a specific plan to build a diverse team of leaders and a diverse workforce. Among Fortune 500 CEOs, currently only 5% are female and only 0.6% are black. One of the most important steps that can be taken to break this pattern is to radically expand the recruiting process to disrupt the long-standing policy of only including current CEOs in the search process. It is easy to see how this pattern only sustains the low representation of diverse groups in the C-suite. To overcome this limitation, companies must be willing to toss out current recruiting strategies, which frequently lead to reliance upon personal networks and narrow experience criteria. Formal teams can be deployed to explore new search parameters. For example, CEO searches can expand to nontraditional disciplines, e.g., academia or the law, where unique but suitable talent may be found. Many progressive companies have also included anti-bias training in their recruiting process.Conclusion
Many wonder how progress in achieving true corporate diversity can possibly be so slow when there now exists an abundance of research demonstrating that companies with a diverse leadership team consistently outperform companies that lag in this area. The board can help overcome this apparent roadblock by educating management about these studies and inspiring the C-suite to utilize the many tools at their disposal to focus on the benefits that come from diversity as well as the steps that can be taken immediately to promote diversity. In the past, diversity may have been viewed as a nice goal, but today it is a proven way to success. Boards and companies that recognize this will gain a significant competitive edge.Media Highlights
Environmental, social and governance (ESG) issues have become more complex and multifaceted than ever before. At the same time, ESG continues to ascend on board and leadership agendas.
In this buyer’s guide, we explore what a market-leading ESG solution should look like and highlight the key areas organisations should be prioritising as they embark on their search.