Do you want to become a champion of board diversity in corporate America? Learn the why, what, and how of leadership diversity. To improve diversity in your organization, read more.

Board diversity in corporate America is STILL under threat. As a C-Suite, HR, or Diversity Leader, you can help ensure leadership diversity benefits all minorities, including men and women of color. But how do you become a champion of board diversity in corporate America?

What is Board Diversity in Corporate Governance?

Board diversity in corporate governance is all about cultivating a broad spectrum of demographic characteristics in the boardroom. The idea behind board diversity is to promote heterogeneity and racial diversity in the boardroom. You can also define board diversity as a crusade against inequity in the workplace. However, to be clear this isn’t a purely altruistic exercise. There are many studies that show a direct link between a diverse board and significantly better financial performance and company governance. Diverse boards and directors bring a valuable range of outlooks, opinions, and ideas that are crucial to better decision-making and problem-solving. When you bring different people together from more diverse backgrounds then naturally you get more progressive insights and fresh approaches that directly benefit the company.

In the US, a boardroom representing actual demographics should be 50% women, 18% Hispanic or Latino(a), 13% African American or Black, and 6% Asian or Pacific Islander. The gender diversity benchmark for corporate America is to increase the representation of women on the board to 35%. Although the definition of board diversity is straightforward, the road to diverse boardrooms is riddled with challenges and setbacks for men and women of color (WOC).

State of Affairs: Board diversity in corporate America

According to a recent study, minorities' representation on Fortune 500 boards sat at 17.5% in 2020. However, companies with more than 40% diversity have quadrupled since 2010. How is that possible when we still have so few minorities on boards?

It’s quite simple. The biggest benefactors of initiatives to diversify boards have been felt by White Women. They saw the largest percentage increase in board seats with a 15% gain in the Fortune 100 and 21% in the Fortune 500.

While it’s great to see Women better represented it is concerning that the progress is so concentrated in this one area. Of the Directors appointed new to the Fortune 100, 79.9% of those board seats were filled with White Directors. Although corporate boards are more diverse than ever it appears that men and women of color have been relegated to the background.

According to a recent census, minority men hold 12% of Fortune 500 board seats. And minority women on the ranks stand at 6%. Amazingly that represents an increase for women of color in the boardroom, while the 12% for minority men has remained unchanged since 2018. Black men lost 1.5% of Fortune 500 board seats to other minority men between 2018 and June 2020. As of November 2020, 56 of the S&P 500 companies did not have a single minority on their boards. Looking at these figures, corporate America has been paying lip service rather than taking concrete actions on board diversity.

Why is Board Diversity failing in Corporate America?

Despite the advances in corporate governance, differences in age, education, gender, and race are still the dominant explanatory variables for imbalances in promotions. Each minority group has a set of hurdles to overcome before they land a promotion or pay increase. During the promotion process, all candidates have to worry about age and education. White women competing for a top-tier opening have to overcome three hurdles, including gender. Men of color have to worry about three variables, including race.

For WOC to get promoted, they must overcome all four - age, education, gender, and race. And this is not a one-time deal. WOC consistently go through extra hurdles, from low-level management to the boardroom. Most women of color get stuck in low-level or mid-level management positions, eliminating them from contesting for corporate board seats. It is a vicious cycle that undermines the representation of WOC in corporate America.

Minorities are under-represented at senior levels, thanks to unfair promotions. However, biased, and inequitable hiring processes also contribute to leadership diversity challenges in American companies. If you hire fewer minorities than the majority, your company’s boardroom will likely have fewer men and women of color. There is no scarcity of qualified WOC in America. The problem is that they are overlooked during hiring processes.

What is the Way Forward?

Addressing board diversity challenges in corporate America requires concerted efforts from state-level, organization-level, and personal. In 2018, California became the first US state to pass a gender diversity mandate requiring all publicly traded companies to have at least one female director by the end of 2019. Public companies in California with all-men boards reduced from 30% in 2018 to less than 3% by 2020. Within the 2 years, women filled 669 board seats.

Currently, women make up about 28% of the board directors at Russell 3000 Index companies in California. But Latinas hold only 1% of the board seats, 2% are Black women, 0.2% are Middle Eastern women, and Asian or Pacific Islander women make up 3.1%. To address this disparity, California signed a new law requiring companies to have at least one man or woman of color on their board by the end of 2021. By including race in the law, California eliminated the loopholes that undermine racial diversity in the boardrooms. As C-Suite, Diversity Leader, or HR, there are several tried-and-tested strategies you can use to champion leadership diversity in your company.

Nurturing the culture of diversity organization-wide

The best strategy to enhance leadership diversity is to nurture inclusivity organization-wide. You can refine your workplace diversity initiatives to give men and women of color true equity when it comes to management opportunities. Leadership Coaching to develop more inclusive practices within the management teams is crucial. Harper and Gray are already supporting many organizations with these initiatives and it is fundamental to success.

Dismantling systemic impediments

Dismantling structural and systemic impediments in your mid-market or Fortune 1000 company can help enhance leadership diversity. At its core, board diversity brings into the boardroom the broad spectrum of America’s demographics. Promoting heterogeneity in the boardroom is a step in the right direction, but it should not be skewed in favor of the privileged. Whether you're a C-Suite, HR, or Diversity Leader, implement board diversity to its fullest extent.

Streamlining hiring and promotion processes

Streamlining your company's hiring and promotion processes can address the root causes of board diversity challenges. As HR, you can organize workshops for your team to mitigate the impact of racial and gender bias on hiring and promotion processes. Another strategy is to outsource your hiring process to experts like Harper and Gray. Eliminating racial inequity from these HR activities will level the playing field and allow men and women of color to compete and win more positions and promotions. It can enhance leadership diversity across all management levels.

Combining these strategies can help address leadership diversity challenges in your company.

Bottom Line

Board diversity in corporate America is under threat. But all is not lost. Nurturing the culture of inclusivity and diversity organization-wide can help dismantle systemic hurdles that impede men and women of color. If diversifying your Board is a key priority going into 2022 then Harper and Gray is well equipped to support.

Get in touch with us to build a strategic roadmap to holistically address Diversity, Equity, and Inclusion in your organization – starting at the top!