‘Check the Box’ Diversity is Missing the Big, Inclusive Picture

On Aug. 11, 2020, American history was made with the presumptive nomination of Kamala Harris as Democratic vice-presidential candidate. Harris is the first Black woman and first South Asian-American woman to be selected as the vice-presidential nominee of a major party. Regardless of your political affiliations, it’s undeniable that this is a monumental event in American history and will inevitably give way to important conversations about gender, race, and ethnicity. The shattering of political glass ceilings inevitably calls attention to corporate glass ceilings, and the advancement or recruiting barriers that they represent.  

It’s true that some executive boards still do not reflect the real world, but tend to be more white and more male than society itself really is. This not only limits an organization’s talent pool but introduces a lack of perspective and creates blind spots that keep good companies from being great. Without a single woman or person of color in the room, an all-white, male, middle-aged executive board can easily be blindsided by issues they never even saw coming.

The 2019 Annual Corporate Directors Survey by PricewaterhouseCoopers examines the relationship between monolithic boards, underperformance, and decreased effectiveness. The survey revealed that 43% percent of Directors find it difficult to voice a dissenting view on at least one topic, but the questioning of company policies and productive debate between members is arguably what breeds board efficacy. Echo chambers do not make effective decisions.

Corporate culture shortfalls are also closely tied to issues of representation encompassing a broad range of dimensions. including race, ethnicity, gender, sexual orientation, socio-economic status, age, physical abilities, religious beliefs, and more. It’s critical that companies recognize and embrace diversity as a meaningful part of bench-building, and not just as a reaction or response to the day’s news cycle. 

Creating a truly diverse, inclusive organization is about looking at the world today and making a commitment to reflect all that the world has to offer. Companies must make an effort to support diversity with a holistic view. 

The addition of diverse voices at C-level positions and in the company’s boardroom is a great place to start fostering a genuine commitment to diversity. Although middle-aged, white men are still being overrepresented, board diversity as a whole is generally trending upward.

However, progress is still incredibly slow. As of August 2020, there are still only 38 women CEOs of Fortune 500 companies, and fewer than 1% of all Fortune 500 CEOs are Black. This is up from 33 in 2019

The first woman ever to appear on the Fortune 500 CEO list was in 1978 (Katharine Graham of The Washington Post). We’ve gained fewer than one female CEO of a leading company per year in nearly fifty years of progress. Gains in board room representation for non-white males in that time have been even lower, while women of color lagged behind them both. 

Progress towards egalitarianism remains slow because, while diversity begets more diversity, homogenous boards tend to remain stagnant. In other words, companies employing women and ethnic minorities in decision-making positions tend to fare better over other companies, and not just in terms of diversity.   

A large majority of Directors agree that board diversity has benefits, including bringing unique perspectives, enhancing board and company performance, and improving relationships with investors. There is a positive correlation between board diversity and a company’s performance, earnings, and innovation. Among Fortune’s list of 100 Best Workplaces for Diversity, strong players like Stryker, Cisco, and Progressive Insurance have all been making forward strides (and, notably, each has embraced explicit Diversity & Inclusion initiatives). 

Despite that positive outlook, director support for mandated board diversity is falling. PwC’s 2019 survey reveals that only 38% of Directors say that gender diversity is very important to their boards, which is the lowest surveyed since 2014. In addition, nearly two-thirds of Directors felt that investors devote too much attention to board gender diversity. To some, even the smallest incremental gains feel overburdensome when compared to the boardrooms of the past. This mindset continues to actively harm the performance of the organizations they lead.

“Backlash” against diversifying boards may just be backlash against mandates to do so. (And, to be frank — the friction that boards are experiencing now is the natural consequences of the very problems that overly homogenous teams created for themselves in the first place.) Mixing and matching different experiences and gifts should not be frictionless–that’s the whole point. 

California has one diversity mandate on their books: as of Jan. 1, California law requires all-male boards of publicly traded companies headquartered in the state to add at least one woman. By 2021, boards with five members must have two women, while those with six members must have three. Public companies that don’t comply with the law could face fines of $100,000 for a first violation and $300,000 for a subsequent violation. Other states, including New Jersey and Michigan, may follow suit.

Companies resisting  “check the box” mandates must proactively build programs with actionable steps. This goes beyond a company memo and requires a real cultural shift. Action, not just words. It requires the commitment and effort of leaders at every level of your organization.

Employing the right middle-managers to spearhead diversity and inclusion initiatives help make all the difference toward progress. With the current visibility of #MeToo and #BlackLivesMatter — which was always here but not always acknowledged — the cultural issues companies face are raw and emotional. Company leadership must welcome these moments of discomfort for what they really are — teaching moments and growing pains. Only then can you begin to name and break down your own organizations’ barriers to inclusivity up and down the bench through honest, open discussion.

In an upcoming article, we’ll take a closer look at diversity and inclusion programs, and the leaders and companies who hold themselves accountable for their results.

At Executives Unlimited, we do more than present candidates that “check a box” for diversity. We also consider a candidate’s full talents and experience beyond their education.

COVID-19 and geographical/travel limitations may present challenges for boards wanting to diversify. Now more than ever, it’s important for companies to broaden their perspectives and leverage creative solutions for recruitment. Executives Unlimited offers comprehensive resources to help you find the best candidates for the right positions.  

For information about our services, please call us at (866) 957-4466 or contact us online today.

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