The Board's Role in Developing Diversity

Rick Hoel

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.

Experts suggest that the fault for this situation may sit with company boards. Real change in these diversity patterns must be led by the board.

Of course, this makes perfect sense. The board of directors occupies the highest level in the company hierarchy and, as such, exercises the most control over company strategy and direction. Keith Meyer of Allegis Partners makes this point clearly. 'The CEO reports to the board. If the tone at the top isn't being set by the board, more likely than not it's not being set further down, and you won't have the same message or delivery of what the company is about. The board has to be engaged.'

While no one doubts the board's key role in guiding the company's strategy and making key strategic decisions on issues such as investment, acquisitions and competitive initiatives, the board must also be willing to take a step back and think hard about the company's overall vision and the image it projects to the world. Diversity is a key component in this regard as the board strives to guide the company in realizing a strong fit into the larger social environment.

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.

Perhaps the most valuable benefit in developing a diverse workforce is the addition of people who may be willing and able to offer constructive challenges to the status quo. As uncomfortable as it may seem at times, companies need to be challenged. 'You have to have people who are willing to raise things that are uncomfortable....... people who are willing to speak the truth even if it's uncomfortable.'

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.


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.

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Rick Hoel

Rick is an international business attorney and currently sits on the Board of Directors and provides general counsel, risk management and compliance services to foreign companies entering the U.S. market including Power Stow America's Inc., a subsidiary of Power Stow A/S in Denmark, the world leader in the supply of tracked conveyor systems to the airline industry. '

Rick has been a partner in a U.S. based litigation firm and has a long history of international in-house counsel experience working with some of the largest multinational companies in the world. His industry experience includes work in the automotive, global telecommunications and electronics, intermodal transport, airline and facility management industries.

Rick is an avid reader and writer with published articles and books on a wide range of topics, including intercultural communication, technology and the practice of law. Rick has lived overseas and works and travels extensively throughout the world.