I closely watch Fortune 500 leadership and board diversity trends. To me, there’s no greater measure of inclusion and diversity than what happens at the top of an organization. In June, Deloitte published “Missing Pieces Report,” a census on female leadership and representation in organizations.
Of note, it was released that the percentage of women on Fortune 500 boards increased to 26.5 percent in 2020. This is an increase of four percent since 2018 and 6.3 percent since 2016. A recent study by the Kellogg Foundation showed that the US economy could be $8 trillion larger by 2050 if the country eliminated racial disparities in health, education, incarceration, and employment. There is a compelling economic reason to diversify our corporate boards at a rate faster than currently happening.
The following chart shows the visual trend of board seats by gender and race for 2016, 2018, and 2020.
The dramatic increase of women on boards is attributed to white women receiving 209 additional board seats, bringing their total to 1226 seats within the Fortune 500 (or 21 percent of seats). In contrast, Black women hold 183 seats, Asian women hold 89 board seats, and Latina women hold only 59 board seats (or about one percent).
Deloitte noted some very real concerns about these diversity trends along racial lines:
Asian/Pacific Islander women made the largest percentage increase (45.9 percent) in board seats gained in the Fortune 500, while Hispanic/Latina women made the second-largest increase (31.1 percent). However, in raw numbers, this increase in representation of 14 seats pales in comparison to the much larger increase of 209 seats by white women. For every board seat newly occupied by a minority woman, white women occupied nearly three new seats. While the laudable goal of gender diversity has made substantial progress, it appears to be coming at the expense of a broader set of minority boardroom candidates.
What this data shows is that people of color, especially Asian women and Latina women, are least likely to be included in these power networks.
“In venture-backed companies, with each new round of funding, board seats are often revisited and restructured to add additional seats. The partner from the fund leading the investment will often take a seat himself, and given only 4.9 percent of all venture partners are female, this naturally skews the demographics white and male,” says Zhenni Liu, partner at MaC Venture Capital.
“But Goldman Sachs and NASDAQ are both leading the way on diversity and asserting positive peer pressure for boards to be more diverse,” says Liu. “So companies are actually adding board seats to meet the diversification goals as they get closer to IPO. In some cases, junior investors will join their GPs unofficially or officially as board observers to bring diverse thinking.”
Public companies and non-venture backed companies have a bit different dynamic. The fact is, relationships still matter immensely in board selection. Sunny Washington, public policy chair of Silicon Slopes Commons, Salt Lake Community College board trustee, board member of Equality Utah, and COO of Blyncsy advises, “If you have discretionary board seats, take the opportunity to be intentional and find diverse candidates who can bring different perspectives and insight. This may require that you expand your personal network. There are so many amazing women of color leaders who might be only one or two connections away from you.” (Or even right in this article!)
Why this matters to business
The highest-performing companies are already diversifying their boards. Fortune recently launched a Measure Up ranking to measure diversity and inclusion at the top of Fortune 500 companies, and their findings show that Fortune 100 companies actually have higher racial and ethnic diversity in their boards than the rest of the Fortune 500.
Among the top 20 companies on the list this year are Microsoft, Target, Gap, Biogen, Intel, Verizon, Allstate, Bank of America, Amazon, Nike, Wells Fargo, Visa, Progressive, Citigroup, and Walmart. It’s great to see these top companies leaning into diversity as a strategic benefit. But I believe the future of board governance will be to measure inclusion, not just diversity. Inclusion drives innovation.
In June 2020, I was on the first commission on Protecting Privacy and Preventing Discrimination, appointed by Utah State Auditor John Dougall. We were convened to review a very technical software procurement case on machine learning. As a former patent attorney and tech entrepreneur, my background was well-suited to understanding both the technology and the procurement process. Some might have been inclined to fill the board entirely with technologists and data privacy experts.
However, Auditor Dougall was very intentional about including technical, non-technical, diverse genders, civilians, law enforcement, and bias specialists on the Commission. We produced a very robust audit. And, unexpectedly, the Commission ended up developing best practice guidelines called the Software Application Procurement Principles for Utah Government Entities, positioning the State of Utah in a thought leadership role nationwide. This is an example of generating innovation from what could have been just a mundane audit process.
Here are some recommendations for Utah CEOs seeking to diversify their boards:
1. Take ownership over your board makeup and expand your own executive network. Be the one to stretch out of your comfort zone, invite new people to lunch, and fight the urge to view people with different backgrounds as “outsiders.”
2. Learn to value many styles of leadership. One of my favorite phrases from Multipliers by Liz Wiseman is: “Be a genius watcher.” The perfect corporate resume does not always correlate to the “best” board member. Spend time learning how candidates think and problem-solve to identify cognitive diversity that will contribute to robust board discussions. It’s tempting to find people who have already served on corporate boards, which shows up in high recycle rates. The reality is that new board members can be trained on the particulars of serving on a board.
3. Educate your current board members on diversity and inclusive leadership. Your next board strategy session or off-site is a great time to do that. The future of board governance will be inclusion, so you can lead on this now. You will gain the benefits of inclusion within your existing board, and make it easier for incoming board members to engage and contribute their great thinking.
As you manage your boards, take a moment to think differently and expand your search to find the “missing pieces” who can take your board to the next level of innovation. There is a wealth of Latina, Asian, and Black women leadership talent in the country and our state, if you are willing to see it.
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Raw Data: https://docs.google.com/spreadsheets/d/1Z4l5Uy6KW6P-NOBl933bzJsqZ9qzxMgmQ9HPDPkZVj4/edit?usp=sharing