Deb DeHaas, vice chairman and national managing partner, Deloitte Center for Board Effectiveness and Linda Akutagawa, chair for the Alliance for Board Diversity and president and CEO, LEAP (Leadership Education for Asian Pacifics)
Boardroom diversity continues to accelerate, bringing the blend of women and minorities at the table closer to levels in line with reality, and there’s still room for the trend to speed up further.
That’s the result of a new study entitled “Missing Pieces Report: The 2018 Board Diversity Census of Women and Minorities on Fortune 500 Boards,” co-published by the Alliance for Board Diversity (ABD) and Deloitte. A key finding was that the number of Fortune 500 companies with greater than 40 percent diversity (meaning members that are not Caucasian males) rose from 69 in 2012 to 95 in 2016 and 145 in 2018. And among Fortune 100 companies, the proportion is even higher, with 46 companies now above the 40 percent diversity level.
While it’s encouraging to see boards being more inclusive for the sake of social fairness, there are multiple benefits to companies themselves.
“Forward-thinking boards who are embracing and want to better leverage diversity tend to have a better financial performance,” Linda Akutagawa, chair for the Alliance for Board Diversity and president and CEO of LEAP told CorpGov in an interview. Ms. Akutagawa said that the benefits include some of the most fundamental aspects of running a business, such a lower number of accounting errors.
She also pointed out that companies with international exposure operate at their own peril if they neglect to have the right blend of board directors. For instance, a company with major operations in Asia may need someone with the right background, perhaps an Asian American or even someone born in the region in order to “understand how to market to them.”
Board diversity can also help companies look inward more effectively, she said. “What are smart companies doing to really understand their customers and their own talent?” she asked.
Internal diversity also benefits greatly when it starts from the very top. “There’s a correlation: When there is a female CEO or chairman, the board and leadership tend to be more diverse,” Deb DeHaas, vice chairman and national managing partner, Deloitte Center for Board Effectiveness, told CorpGov. “When there is more diversity in the boardroom, it has an impact on how the company thinks about inclusion.”
Among the companies that have both diverse boards – at the 40 percent level or greater – and also diversity in the C-suite are large multinationals. That list includes the likes of PepsiCo, Procter & Gamble, Archer-Daniels-Midland, and HP.
Despite the recent rapid progress, one board role remains stubbornly made up of white males: the chairman. Some 91.1% of board chair roles in the Fortune 500 were held by Caucasian men in 2018, an increase from 2016.
Ms. DeHaas postulates that the chairman’s close connection to the CEO may explain the slow rate of progress in the board chair role. Many chairmen are either current or former CEOs, who are themselves more often men.
And Ms. Akutagawa believes that the chair is quite often filled with someone who has many years of board experience. “Having a track record on a board makes them seem less risky” as candidates for chairmen, she said.
Even so, there are signs of diversity creeping ever closer to the top board job. Important committee chair roles, including the nominating and governance committee chair, have a high level of diversity that continues to rise.
John Jannarone, Editor-in-Chief